Non-Decision On Toysmart.com

A bankruptcy judge has refused to prohibit Toysmart.com's customer information from being sold as an asset against its debts. See the New York Times or the AP wire (CNET) version. Judge Kenner notes that objections may be raised later, and believes that in the absence of a buyer, any decision now would be premature. This case is key because, if the web's privacy policies are not guaranteed after a company goes belly-up, they're mostly toilet paper. But the lawyer for the now-bankrupt company argued that the privacy contract between TRUSTe and Toysmart, allegedly guaranteeing visitors' privacy, "like others in a bankruptcy proceeding, may have to be broken in order to realize the highest value for creditors in a sale."

That lawyer went on to say that the "adverse publicity" raised about the auctioning-off of your privacy made it hard to find a buyer for your personal information. A shame. "Now we're back where we started."

Why is he so worried about not finding a buyer? Because information about customers is valuable. Don't let corporations pretend otherwise. Selling who you are and what you buy can be a substantial source of revenue; as far as these companies are concerned, that's just one of their assets, like their cash in the bank or their real estate. Toysmart will continue to try to auction off those databases, probably after media attention dies down and it becomes easier to make the sale quietly.

And sadly, even if privacy prevails this time, it may not be important enough to set precedent, since the presence of childrens' information makes the Toysmart case "unique."

Update: 08/18 04:09 AM by J : For background info on the dot-com going-out-of-business process, check out this PlanetIT article. Note in particular that it can be hard for many dot-coms to find any tangible assets to sell, thus, customer data becomes more important.