FTC Asks Bankruptcy Court to Protect RadioShack Consumer’s Personal Information

Radioshack SettlementFTC Consumer Protection Director, Jessica Rich, recently sent a letter to the court appointed ombudsmen in the bankruptcy case of RadioShack. In the letter, Ms. Rich recommended conditions the court could place on the sale of RadioShack consumers’ personal information to better protect the consumer’s privacy.  Among the assets being put up for auction to settle the bankruptcy, is the personal information of many RadioShack consumers, including names, addresses, email addresses, and purchase histories.  RadioShack’s bankruptcy documents indicate the company is purportedly selling 117 million customer records, with more than 66 million containing information related to shoppers’ physical addresses and eight million associated with emails.

Continuing on, Ms. Rich pointed to RadioShack’s own promises made both online and in stores regarding the privacy of consumers’ personal information.  Those promises included a promise not sell consumers’ personal information or the company’s mailing list.  As an example, Ms. Rich pointed to the FTC’s previous intervention in the bankruptcy of Toysmart, an online retailer.  There, Toysmart was accused of seeking to sell their consumer’s personal information in contravention of the company’s privacy policy.  Toysmart eventually settled with the FTC, which placed a number of conditions on the sale of the customer data under the terms of the settlement agreement.  Ms. Rich contends that similar conditions should be applied to the sale of the RadioShack customer information.

Ultimately, Ms. Rich recommends that consumers’ information not be sold as a stand-alone asset, but instead be grouped with other assets.  Further, Ms. Rich recommends that the data, if sold, should be sold to a company that is in substantially the same business as RadioShack, that the buyer agree to be bound by RadioShack’s privacy policies, and that they buyer provide notice to consumers and obtain their informed consent before using the data in a way that is contrary to RadioShack’s personal data.  Given Ms. Rich’s concerns, whom would be an agreeable company to purchase the RadioShack consumer data?

As part of the RadioShack bankruptcy, sixteen entities bid to obtain RadioShack’s brand and customer data, including Regal Forest, which owns rights to the name in Latin America; Delta Marketing, the company behind camera retailer 47th Street Photo; and Wonderland Investment Group, the owner of an eco-friendly bus manufacturer.  The winner was Standard General LP, a hedge fund, which had already bought hundreds of RadioShack store leases in March 2015.  In addition to buying the store leases, Standard General agreed to pay an additional $26.2 million for RadioShack’s name and intellectual property.

A spokesman for Standard General has said that the “firm has been working with the state attorneys general to ensure that the customer data is protected, and has committed to maintain RadioShack’s strict privacy policies.”  It has also been reported that Standard General has been in talks with the FTC to ease any nerves regarding the privacy of RadioShack’s customers.  Even still, do some of the recommendations posed by Ms. Rich stand in the way of Standard General?

Ms. Rich recommended that the customer data be sold to an entity in substantially the same business as RadioShack.  Standard General is a hedge fund, which is a far cry from an electronics retail chain like RadioShack.  While the hedge fund has bought up a number of RadioShack’s store leases there is no guarantee that they will just step into the shoes vacated by RadioShack.  As a result, there is no telling what Standard General might do with RadioShack customers’ data.  The bankruptcy court has yet to rule on the matter.

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