FTC recommends conditions for sale of RadioShack customer data

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Credit: Shannon Stapleton/Reuters

The FTC said it would prefer a model based on a settlement adopted with online toy retailer Toysmart.com

The U.S. Federal Trade Commission has weighed in on the contentious issue of the proposed sale of consumer data by bankrupt retailer RadioShack, recommending that a model be adopted based on a settlement the agency reached with a failed online toy retailer.

The state of Texas, which is leading the action by several states, has opposed the sale of personally identifiable information by RadioShack, citing the online and in-store privacy policies of the bankrupt consumer electronics retailer.

Apple and some wireless carriers have opposed the sale of some of the customer data, which Apple said was collected from their respective customers and was governed by their privacy policies.

In a letter Saturday to a court-appointed consumer privacy ombudsman, Jessica L. Rich, director of the FTC's bureau of consumer protection, said that the agency's concerns about the transfer of customer information inconsistent with RadioShack's privacy promises "would be greatly diminished" if certain conditions were met, including that the data was not sold standalone, and if the buyer is engaged in substantially the same lines of business as RadioShack, and expressly agrees to be bound by and adhere to the privacy policies.

Rich said that the proposal being made was in line with the settlement FTC reached in 2000 with Toysmart.com, a failed online retailer of toys.

The FTC has said that alternatively RadioShack would have to receive permission from customers to transfer their data. Information of customers who do not agree would have to be purged.

In her report, ombudsman Elise S. Frejka, recommended the sale of the personal data under conditions similar to those recommended by the FTC, with some additional provisions. The data from the wireless operators and specific mobility products is to be scrubbed.

In the first round of sale, RadioShack sold about 1,700 stores to General Wireless, an affiliate of hedge fund Standard General, which entered into an agreement to set up 1,435 of these as co-branded stores with wireless operator Sprint. Some other assets were also sold in the auction.

The company asked a bankruptcy court for approval for a second auction of its assets, which included the consumer data. On May 11, RadioShack selected General Wireless as the highest and best bidder for the remaining assets, including the customer data.

RadioShack has said that credit card numbers, debit card numbers, and transaction data that are not typically found on a standard sales receipt will not be sold. Up for sale are a "contact database," consisting of about 8.5 million opt-in email addresses, of which approximately 3.1 million were active within the last 12 months, and a "customer database," consisting of about 67 million customer names and physical mailing address files, of which approximately 11.9 million made a purchase in the last 12 months.

As a result of court-ordered mediation, the states, the highest bidder and RadioShack have reached an agreement in principle that will resolve many of the objections and concerns raised by the state attorneys general about the sale of the customer data, according to the ombudsman report. The settlement is subject to certain consents and approvals, which are expected by the close of business on Tuesday.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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