RadioShack Sale Sparks Data Privacy Concerns

AT&T and more than 20 states are opposing the potential sale by RadioShack of 13 million email addresses and 65 million customer names and addresses as part of its bankruptcy proceedings, fearing such a move could set a dangerous precedent for privacy and proprietary rights in the Internet age.

The Texas-based electronics retailer filed for bankruptcy in February as part of a plan to close about half of its stores in the U.S. and see Sprint open mini-shops in up to 1,750 of its remaining stores. But the possibility of it selling years’ worth of collected consumer data highlights a potential and worrisome trend, as compiling information from purchases is becoming a common practice for retailers – many of which are also seeking new revenues as sales decline at brick and mortar stores.

Sears Holdings Corp. – which owns Kmart and Sears stores – and Macy’s and JCPenney are also planning to close shops in 2015, for example.

RadioShack has named hedge fund Standard General as the preferred winner of its bankruptcy auction and collaboration with Sprint, but the deal still must be approved by a bankruptcy court in Delaware.

RadioShack's privacy policy states that “we will not sell or rent your personally identifiable information to anyone at any time." And selling such assets would be a breach of that privacy policy, New York Attorney General Eric Schneiderman said in a statement.

Schneiderman promised “appropriate action to protect New York consumers."  

“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,” Schneiderman said.

Ahead of Sprint possibly taking residence in RadioShack stores, some of the data collected by the retailer is also being described by AT&T as proprietary information that should be destroyed or moved, the telecom argued in a filing to the Delaware bankruptcy court.

“Now that this business relationship will come to an end, the AT&T protected information must be disposed of or transitioned properly and not provided or sold to third parties,” AT&T said in its filing.

Privacy protections are an increasing area of government concern. The Federal Trade Commission in 2012 reached a record settlement with Google regarding alleged violations of consumer privacy, and recently took messaging service Snapchat to task over privacy concerns. 

Pressure against the RadioShack proposal makes it unlikely that the information will be sold, predicts Marc Rotenberg, president of the Electronic Privacy Information Center.

“It's a clear breach of their privacy policy,” he says.