RadioShack aims to sell customer data, breach privacy policy

Cellphones, batteries and connecting cables aren't the only things up for grabs as RadioShack's going-out-of-business sale winds down. The company also has millions of customer names and email addresses at its disposable, and, with that information, a sizeable amount of potentially valuable consumer data. 

At a time when Target is offering to pay $10 million to customers who filed a class action suit because their personal information was obtained in a data breach, RadioShack customer data may be part of the electronics retailer's bankruptcy liquidation. The company's assets include more than 65 million customer names and addresses, as well as 13 million email addresses. Phone numbers and information on shopping habits may also be part of the offer.

There are, however, major obstacles to such a deal. The main auction for RadioShack's assets in the U.S. Bankruptcy Court for the District of Delaware just concluded on Tuesday several days later than expected. Hedge fund Standard General won out over a bid by lender Salus Capital Partners. Standard General is expected to keep 1,743 stores and 7,500 jobs in a re-launch of the business in partnership with Sprint.

There may also be challenges involved in the sale of RadioShack customer data in as many as 25 states, including Texas, Tennessee and New York, reported PC World. And according to court filings, RadioShack's privacy statement said the company "will not sell or rent your personally identifiable information to anyone at any time."

"The Debtors have affirmatively stated in multiple privacy policies currently in effect that consumer PII (personal identifying information) will never be sold. Yet the Debtors come before this Court with a motion which seeks to do precisely that," read the multi-state challenge initiated by Texas on March 23.

"When a company collects private customer data on the condition that it will not be resold, it is the company's responsibility to uphold their end of the bargain," said New York Attorney General Eric Schneiderman. "My office will continue to monitor RadioShack's bankruptcy sale and whether it includes auctioning off private customer data. We are committed to taking appropriate action to protect New York consumers."

AT&T also objects to the sale of customer data collected by RadioShack while selling its products and services, Texas Monthly reported. AT&T said in a statement that that data is not RadioShack's to sell.

Selling customer data as part of bankruptcy assets "is very common," Robert Braun told Advertising Age. Braun, partner and co-chair of the privacy information management and data protection group at the Jeffer Mangels Butler & Mitchell law firm, said the practice has not been challenged in any significant way yet, especially now that corporate privacy policies have become commonplace.

"This would seem to fly in the face of [RadioShack's privacy policy]. However, this is bankruptcy and the bankruptcy courts have a great deal of leeway in overriding policies," Braun said. The mission of most bankruptcy courts is to make sure creditors get the most money possible from the sale of bankruptcy assets, and it is in their best interest to sell customer data to achieve that end.

"Information is like any other asset that is owned by a company, and a bankruptcy court has a duty to maximize the recovery of assets by the creditors of a company, so it is going to approve a transaction which in balance it believes is going to get the best deal for creditors of the company," he said. "Meanwhile, people are out there ready to buy it because it's valuable."

The sale of customer data is common and is frequently included in the intellectual property assets of a company being sold or liquidated, said Justin Yoshimura, founder of Retail Growth Fund. In the case of bankrupt retailers such as Delia's, Cache, Deb Shops and WetSeal, "all of those included the customer information list as part of the sale."

This story was updated on April 1, 2015 to reflect the results of the bankruptcy hearing.

For more:
-See this Hilco Streambank assets list
-See this Wall Street Journal article
-See this PC World article
-See this Reuters article
-See this Texas Monthly article
-See this Advertising Age article

Related stories:
RadioShack auction delayed by loan terms
RadioShack selling brand and locations separately
RadioShack pushing for faster sale of assets
RadioShack may be down, but it's not totally out
RadioShack files for bankruptcy

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