IP: Re: Amazon informing customers that the information they give is considered a company asset that can be sold

[Dave Farber <farber@cis.upenn.edu>]

>X-Sender: jnoble@pop.dgsys.com
>Date: Mon, 4 Sep 2000 16:07:09 -0400
>To: farber@cis.upenn.edu
>From: John Noble <jnoble@dgsys.com>
>Subject: Re: IP: Amazon informing customers that the information they give
>  is   considered a company asset that can be sold
>
>This policy revision is fall-out from the FTC suit against Toysmart.com
>earlier this summer. When toysmart landed in bankruptcy, its customer list
>was a prime asset. The bankruptcy laws, designed to protect creditors,
>provide for the sale of the debtor's assets and distribution of proceeds to
>creditors. However, the bankruptcy laws ran smack into the Childrens Online
>Privacy Protection Act (COPPA), and the FTC stepped in to block the sale on
>allegations that Toysmart had a privacy policy that promised not to share
>customer information.
>
>The suit was settled, and the FTC issued a release claiming that "the
>agreement forbids the sale of this customer information except under very
>limited circumstances," and that "this settlement shows that the FTC is
>serious about enforcing the Children's Online Privacy Protection Act." But
>there's less there than meets the eye. As described by the FTC:
>
> >Under the settlement agreement, Toysmart will file an order today in
> >Bankruptcy
> >Court ("Bankruptcy Order"), prohibiting Toysmart from selling the customer
> >list
> >as a stand-alone asset. The settlement only allows a sale of such lists as a
> >package which includes the entire Web site, and only to a "Qualified 
> Buyer"--
> >an entity that is in a related market and that expressly agrees to be
> >Toysmart's successor-in-interest as to the customer information.
>
>In short, if you want the customer information, you have to buy the domain
>name. Commissioner Orson Swindle, who is usually not the staunchest
>consumer advocate on the Commission, dissenting:
>
> >If we really believe that consumers attach great value to the privacy of
> >their
> >personal information and that consumers should be able to limit access to
> >such
> >information through private agreements with businesses, we should compel
> >businesses to honor the promises they make to consumers to gain access to
> >this
> >information. Toysmart promised its customers that their personal information
> >would never be sold to a third party, but the Bankruptcy Order in fact would
> >allow a sale to a third party. In my view, such a sale should not be
> >permitted
> >because 'never' really means never.
>
>The upshot of all this is that Amazon, and other e-commerce businesses,
>realized that their privacy policies could be construed by the FTC (and
>class action plaintiffs lawyers) to bar the transfer of customer
>information in the context of selling the company or part of the company,
>when all they intended to promise was that they wouldn't get into the
>*business* of selling customer information. The FTC's construction would
>have had a disasterous effect on Amazon's ability to borrow or raise debt
>capital because customer information is a huge part of the company's going
>concern value.
>
>It's odd, I think, that no one is bothered by the fact that when you buy a
>brick-and-mortar bookstore (or a retail dry-cleaning operation or a pizza
>franchise) you get customer records, but when it's an online business the
>same transaction is an Orwellian nightmare.
>
>At 10:30 AM -0400 9/4/00, Dave Farber wrote:
> >Amazon.com -- apparently forgetting for the moment that it's currently on
> >the receiving end of several privacy-related class-action lawsuits --
> >yesterday posted a revised privacy policy informing customers that the
> >information they give is considered a company asset that can be sold. "As
> >we continue to develop our business, we might sell or buy stores or assets.
> >In such transactions, customer information generally is one of the
> >transferred business assets," the company said. The company also said that
> >"in the unlikely event that Amazon.com Inc., or substantially all of its
> >assets are acquired, customer information will of course be one of the
> >transferred assets." Amazon claims the maneuver was engineered to build
> >trust among its customers... (New York Times story; free subscription
> >required)
> >
> >http://www.nytimes.com/library/tech/00/09/biztech/articles/01amazon-priva 
> cy.htm
> >l
>
>
>John Noble