In its effort to keep its creditors at bay, RadioShack plans to sell huge amounts of customer information it has collected over the years, but the Federal Trade Commission is stepping in.
In a letter to court-appointed consumer privacy ombudsman Elise S. Frejka, FTC consumer protection director Jessica Rich requests the bankruptcy court to place certain conditions restricting the electronics retailer's sale of customer data in order to protect their privacy.
Rich recommends conditions similar to those agreed upon during the bankruptcy of failed online toy retailer Toysmart. Among these conditions, the FTC wants RadioShack to sell customer information bundled with other assets and that the sale should be made to another entity in the same line of business.
The FTC also says that the buyer must agree to the privacy policy RadioShack currently has in place with its customers. Should the buyer alter the terms of the policy, it must expressly inform customers about the policy change and ask for their explicit consent before using their information in other ways. Data of customers who refuse to have their information sold to another entity should also be removed, says the FTC.
"[W]e believe it would be appropriate for RadioShack to obtain affirmative consent from its customers before it transfers the data," says Rich. "The consent process would allow customers to make their own determination as to whether a transfer of their information would be acceptable to them. For consumers who do not consent, their data would be purged."
RadioShack plans to sell "67 million customer names and physical mailing address files together with any associated transaction data collected by the debtors within the five year period prior to its bankruptcy," says Frejka in her own recommendation.
The company originally planned to sell off its customer information database to General Wireless, a Standard General subsidiary that bid $26.2 million for loads of customer data from RadioShack. The deal with General Wireless also includes more than 1,700 RadioShack stores, which it plans to operate jointly with Sprint.
However, several states have raised objections to the sale because RadioShack did not specify how customer information would be sold and how the buyer plans to use the acquired data. Private companies, including Apple and AT&T, also stepped in, saying that the sale could possibly compromise the privacy of their customers since RadioShack is a reseller of their products.
Approval for the transfer of customer data from RadioShack to General Wireless is set for a hearing to be presided by Bankruptcy Judge Brendan L. Shannon on May 20.
Photo: Becky Stern | Flickr
