RadioShack and a group of state attorneys general reached an agreement on May 20 that addresses significant privacy concerns raised by state consumer protection authorities and the Federal Trade Commission (FTC) regarding the potential sale of tens of millions of customer names, addresses, e-mail addresses, and purchase histories. The agreement will allow individuals to opt out of the transfer of their data as part of a court-approved sale of the bankrupt company’s assets to General Wireless Inc., a subsidiary of hedge fund Standard General.
In a May 18 announcement, the FTC said its consumer protection director, Jessica Rich, sent a letter to the court-appointed consumer privacy ombudsman in the bankruptcy case recommending conditions the court could place on the sale of consumers’ personal information to protect their privacy. According to the announcement, those conditions included prohibiting the sale of consumers’ information as a standalone asset, allowing the information to be sold only to another entity substantially the same as RadioShack, requiring the buyer to comply with RadioShack privacy policies that were in place when the customer information was collected, and requiring new customer consents if the information is to be used in a materially different way than that provided in the original privacy agreement.
Under the agreement, General Wireless will be allowed to purchase no more than 67 million out of the 117 million customer files originally available for sale. According to a statement on the website of the Massachusetts attorney general’s office, the remainder of the files will be destroyed by RadioShack, and General Wireless will be prohibited from selling or sharing any customer information it has purchased with any other entity. The transfer of credit and debit card numbers also will be prohibited under the terms of the settlement.
A U.S. bankruptcy judge approved the sale of RadioShack on May 20 after assurances were made to the FTC that appropriate safeguards would be in place to protect the information RadioShack collected from consumers. The FTC’s previous intervention in a bankruptcy case was in July 2000, when the agency announced a settlement with Toysmart.com that prohibited the sale of customer information except under very limited circumstances.