Legal and privacy issues surrounding customer databases and e‐merchant bankruptcies: reflections on Toysmart.com
| DOI | https://doi.org/10.1108/02635570410525762 |
| Pages | 209-217 |
| Date | 01 April 2004 |
| Published date | 01 April 2004 |
| Author | Eileen P. Kelly,G. Scott Erickson |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Legal and privacy issues
surrounding customer
databases and
e-merchant bankruptcies:
reflections on
Toysmart.com
Eileen P. Kelly and
G. Scott Erickson
Introduction
On June 9, 2000, Toysmart.com, an online
merchant of children's toys, filed for
bankruptcy. Subsequently, Toysmart placed its
assets up for sale to help pay its creditors. Listed
among the company's assets was its customer
database. The latter contained detailed
information on some 250,000 customers
(Richtel, 2000). Toysmart attempted to sell this
database despite previous assurances to
customers that their purchasing and other
personal data would be kept confidential and
not shared with third parties. An outcry from
customers, privacy advocates and government
officials followed. The latter contended that
Toysmart was breaching its express promise of
privacy to its customers. Creditors of Toysmart,
on the other hand, contended that the customer
database was a company asset that belonged in
the debtor's estate for creditors to lay claim on.
The Toysmart case highlights a potential
conflict between individual privacy rights and
creditor claims to assets under the nation's
bankruptcy laws. This article examines the
Toysmart case in light of the legal and privacy
issues that arise when an Internet-based
company files for bankruptcy.
E-commerce, data collection and privacy
policies
Electronic commerce has grown dramatically in
the past few years and is poised to grow even
more so. In the first official US government
estimate of retail e-commerce sales, the
Commerce Department announced that US
retail e-commerce sales were $5.3 billion for the
fourth quarter 1999. By 2000, fourth quarter
sales rose to $9.2 billion. In the fourth quarter
2001, sales rose again to 10.8 billion, only to
rise again to 13.8 billion in the fourth quarter of
2002 0.1 percent from the previous year (USDC
News, 2003).
The explosion in electronic commerce has
been accompanied by increasingly sophisticated
information-gathering techniques on Web
customers and site visitors (Wang, 2001). The
ability for online merchants to collect detailed
data on their customers far exceeds anything
available at their traditional bricks and mortar
The authors
Eileen P. Kelly is Professor of Management and
G. Scott Erickson is Associate Professor of Marketing,
both at the School of Business, Ithaca College, Ithaca,
New York, USA.
Keywords
Information management, Privacy, Bankruptcy,
Customer information, Online operation
Abstract
From a consumer perspective, the issue of personal,
informational privacy is of growing concern as our society
becomes more and more digitized. For businesses however,
detailed customer information is a valuable and lucrative
commodity. The latter is particularly true for online
businesses with few tangible assets. In order to allay
consumer privacy fears, some online businesses post privacy
policies promising not to divulge customer information. Yet,
when an online business files for bankruptcy, creditors will
demand that the customer database be sold with other
assets. This article examines the legal and privacy issues
surrounding customer databases that arise when an online
business files for bankruptcy
Electronic access
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209
Industrial Management & Data Systems
Volume 104 .Number 3 .2004 .pp. 209-217
#Emerald Group Publishing Limited .ISSN 0263-5577
DOI 10.1108/02635570410525762
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