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Toysmart.com Customer Profile Advisory; TRUSTe Seeks to Stop Potential Sale of Customer Data

June 29, 2000 -TRUSTe today advises the Web community that it has learned that Toysmart.com, a participant in the TRUSTe program, may be planning to sell its customer profiles as part of the company's liquidation. These customer profiles, which may include personally identifiable information, were collected from users under the TRUSTe-approved privacy policy that no information would ever be shared with a third party without the express consent of the user.

TRUSTe further believes that Toysmart.com may be using its creditors recent bankruptcy filing as justification for the sale. On June 9, 2000, Toysmart.com filed for Chapter 11 proceedings with the bankruptcy court in the Commonwealth of Massachusetts. The hearing is scheduled for July 26, 2000.

Despite repeated efforts to contact staff within the company, TRUSTe has not received a reply.

TRUSTe believes that the sale of this data is ethically wrong and will do everything within the law to protect consumers from this potential invasion of privacy.

The strong arm of the TRUSTe program is the internationally enforceable contract that each Web site must sign as a prerequisite to displaying the privacy seal. Companies that deviate from their policy can be found in breach of contract.

TRUSTe has initiated its escalation process and is investigating methods of removing Toysmart.com from its privacy program. TRUSTe has also alerted this case to the Federal Trade Commission for further review under the suggestion that the potential sale may be classified as unfair and deceptive marketing practices. Under section five of the FTC Act, the Commission has enforcement authority against such practices.

TRUSTe will continue to monitor progress with this case and report any decisions that have been made to the Web community.


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TRUSTe Files Objection to Federal Trade Commission Consent Agreement With Toysmart.com - Agreement Falls Short of Protecting Privacy Online

August 8, 2000 -TRUSTe today advises the Web community that it has filed an objection to the Federal Trade Commission (FTC) consent agreement with Toysmart.com.

In the objection, filed with the United States Bankruptcy Court, TRUSTe requested that the court deny the FTC's consent agreement in light of its failure to ensure that Toysmart.com's users will be provided with adequate notice of the sale and choice to prevent the sharing of their personal information.

TRUSTe applauded the FTC for its significant effort in seeking to resolve the Toysmart.com matter indicating that it "demonstrates that websites must take privacy seriously as a matter of public policy and law." However, TRUSTe argued that the consent agreement falls short of what is needed to give users full control over their personal information to protect their privacy online.

TRUSTe will continue its current motion to halt the sale of Toysmart.com's customer database under conditions of inadequate notice and consent. The next hearing is scheduled for August 17th, 2000, at the United States Bankruptcy Court for the District of Massachusetts.

TRUSTe alerted this case to the FTC in late June 2000 under the suggestion that Toysmart.com's intended sale of customer data would violate the FTC's prohibition against unfair and deceptive practices. TRUSTe filed its own motion with the United States Bankruptcy Court arguing that the sale of customer personally identifiable information would breach the contract between Toysmart.com and TRUSTe, would violate user's expected privacy rights, and could irreparably harm the state of trust and confidence in the Internet.

On July 20th, 2000, the FTC entered into a consent agreement with Toysmart.com indicating that the company's website assets could only be sold to a business in the family commerce market that would serve as a successor-in-interest as to the uses of the customer information.

TRUSTe will continue to monitor progress with this case and report any decisions that have been made to the Web community.


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TRUSTe Applauds Bankruptcy Court Decision Regarding Toysmart.com

August 17, 2000 -- TRUSTe applauds the decision of United States Bankruptcy Court Judge Kenner to reject the Federal Trade Commission (FTC) settlement in the Toysmart.com bankruptcy case. TRUSTe had objected to the FTC settlement because it failed to provide customers with notice and an opportunity to choose whether to allow their personal data to be transferred to a new buyer.

TRUSTe's CEO and Executive Director, Bob Lewin, today commended the widespread support for action to prevent the inappropriate sale of Toysmart.com's customer database.

Said Lewin, "Today's decision is a victory and serves as a precedent of how government and industry must work together to ensure that no Web site can go back on their privacy promises. After alerting the Web community in late June to Toysmart.com's intended sale of personal, private information, we received an overwhelming response from the Federal Trade Commission and more than 40 state attorneys general. By pooling the strong arm of the TRUSTe program with the weight of appropriate government intervention, we have sent a strong message to consumers online: there are third parties that will fight to ensure that you are always in control of your personal information to protect your privacy."

TRUSTe will continue to closely monitor this situation.


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TRUSTe Applauds Proposed Toysmart.com Settlement

January 9, 2001 - TRUSTe applauds the proposed settlement reached in the Toysmart.com bankruptcy case. Under the terms of the settlement, a subsidiary of Disney will purchase Toysmart.com's customer database for $50,000. The database will not be transferred to a third party, but will be immediately destroyed by Toysmart.com. No customer information will be transferred, shared, or sold as part of the agreement.

In July 2000, TRUSTe alerted the Web community about Toysmart.com's intention to sell its customers' personal information. After forwarding the case to the Federal Trade Commission (FTC) as a potential violation of the FTC's prohibition against unfair and deceptive practices, TRUSTe was joined by the FTC and more than 40 state attorneys general in opposing the data sale in court.

"The settlement reached today is a victory for consumer privacy, an example of the effectiveness of self-regulation, and proof of TRUSTe's strength in ensuring that privacy promises are kept," said Bob Lewin, President and CEO of TRUSTe. "This action sends a strong message to consumers online: TRUSTe will fight to make sure you have control of your personal information to protect your privacy."

About TRUSTe

TRUSTe, the leading privacy seal program, is an independent organization dedicated to building consumer trust and confidence in the Internet. The TRUSTe coalition of participating companies includes America Online, Excite@Home, Intel, Intuit and Microsoft.

Founded in 1997, TRUSTe is the premier privacy seal program worldwide. The TRUSTe seal is currently displayed on all of the Internet's portal sites and has been rated by Cheskin Research as the most trust-invoking seal online. Since the summer of 1999, Nielsen//NetRatings has continuously rated TRUSTe as the most visible symbol on the Internet. Today, the TRUSTe maintains the largest privacy seal program with nearly 2,000 Web sites certified throughout the world.

TRUSTe is based in San Jose, CA, with an office in Washington, DC. To learn more about protecting your privacy online, visit the TRUSTe Web site at www.truste.org.