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Online Privacy Protection

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The captains of Net commerce bleat long and loud about their respect for the personal privacy of their online customers. Many post that seemingly unbreakable and heartwarming pledge in bold letters on their Websites.

Buyers, in turn, happily reveal their names, addresses, emails, preferences, wish lists, and birth dates in the hope that online marketing will be more precisely targeted to their shopping interests and with the assurance that this highly sensitive personal information will never be shared with third parties.

Too often, however, promises are made and promises are broken. And it looks like it’s going to get worse, judging by the spate of struggling online companies.

Some of the dead and dying are now scrambling for cash, and the personal profiles of their customers are a powerful last-ditch currency. In recent months, swooning dot-coms such as Boo.com and Toysmart.com have announced–directly or indirectly–that the potentially lucrative information on individual buyers in their customer databases is for sale.

Often these companies own no real assets apart from these lists, which they argue they are forced to sell to maximize repayment of staggering debts. But customers who once shopped at these sites and were assured that their personal information would not be sold or bartered now face the ugly realization that their personal information may be for sale to the highest bidder.

Creditors argue that they are only trying to extract as much value as they can from their dot-com debtors. Antiquated bankruptcy laws provide little balance between the privacy interests of online customers and the financial interests of creditors.

The argument that the new owners of the data will use it in a matter consistent with the bankrupt company’s original commitment to customer privacy sounds as hollow (and as unenforceable) as the original pledge, which has been ground into the dust.

The Federal Trade Commission, for its part, has stepped in and is initiating legal action against companies that violate the privacy commitments they made to their customers. It’s a promising move, but this early governmental saber rattling must be the beginning of a much broader initiative.

Bankruptcy can’t be used as an excuse to violate customer privacy, and filling in the massive loopholes in existing laws would be a good autumn project for self-regulatory bodies such as TRUSTe and BBBOnLine, both of which were formed to help stem online privacy abuses. Online retailers need to support these actions. In the past, the leaders of Net commerce have talked a pretty good game about respecting customer privacy. Now it’s time to take that hot air and turn it into something solid.