As if empty bank accounts weren’t bad enough for business, ToySmart, an e-commerce site majority-owned by Disney, became the first dot-com charged by the federal government with violating the privacy of underage users after the site filed for bankruptcy.
The Federal Trade Commission alleges that ToySmart.com collected personal information from children who used the site without first receiving permission from their parents — a violation of the Children’s Online Privacy Protection Act of 1998 or COPPA, which went into effect April 21, 1999, nearly a month before ToySmart ceased operations.
This is not the first of the company’s legal woes. In late July, the FTC reached an agreement on separate charges brought by the agency that ToySmart.com attempted to sell confidential consumer information after its dissolution this past May.
As of late, objections to the sale of confidential customer information by 39 states had driven the Web site to temporarily pull its customer list from auction, according to the Massachusetts Attorney General’s office. The company attempted to sell the list, among other assets, to pay its debts.
Disney had offered to buy the list to ensure consumer’s privacy. But the attorney general said that while Disney may protect consumers information, ToySmart would still be selling the list to a third party, which goes against their initial promise made by the company.
ToySmart, which sold educational toys, shut down after receiving an estimated $45 million influx of cash from Disney in 1999.