RadioShacks Consumer Data: A Highly Scrutinized Asset

06.15.2015 | By Gavrila A. Brotz

Following the Texas Attorney General’s objection to the sale of RadioShack Corporation’s consumer data as an asset in its bankruptcy, 37 other state attorneys general and a large number of other consumer protection entities formally raised similar concerns. RadioShack, which filed for bankruptcy on February 5, 2015, revealed in a representative’s deposition on March 20, 2015 that it held personally identifiable consumer data of 117 million consumers, or 37% of the residential population of the United States. The State of Texas filed an objection in the bankruptcy proceeding, arguing that the sale of this personally identifiable consumer data would breach RadioShack’s privacy policies, thereby violating states’ consumer protection laws. Texas’s objection was formally joined and supported by dozens of other states who continued to monitor the potential sale of that asset closely.

The U.S. Trustee and the Federal Trade Commission joined that chorus. The U.S. Trustee asked the court to exclude customer data from the sale of RadioShack’s assets, and the FTC’s Bureau of Consumer Protection’s Director raised concerns that the sale or rental of protected data could constitute a deception or unfair practice under Section 5 of the FTC Act.

RadioShack had pulled the sale of its personally identifiable consumer data prior to the start of the auction of its assets on March 23, 2015, but later indicated that it would still seek to include that data as part of the sale of RadioShack’s intellectual property assets. The dispute became more heated in advance of the auction of its intellectual property.

In the face of such opposition and concern, RadioShack mediated and ultimately settled with the states; the settlement was approved by the court on May 20, 2015. RadioShack agreed to destroy the vast majority of its consumer data, including its customers’ credit and debit card numbers, Social Security number, dates of birth, and phone numbers. In fact, the new owner, General Wireless, will only retain the electronic mail addresses of individuals who specifically requested information from RadioShack during the past two years, and will not sell or share that information to any entity, including its partner, Sprint Communications. Representatives of the FTC’s Bureau of Consumer Protection were also involved in the mediation and agreed with the ultimate deal.

The arguments over the sale of RadioShack’s consumer data demonstrate the intense level of interest in consumer data protection. RadioShack’s consumer data was believed to have been one of the most valuable of its estate’s assets. This type of settlement could become the standard in future bankruptcies, as the value of consumer data continues to skyrocket along with the political interest in protecting it.