RadioShack Sale of Customer Data Could Be Unlawful, FTC Says

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RadioShack Corp.’s planned sale of customer data as part of its bankruptcy case could violate federal law, according to the Federal Trade Commission, which wants conditions placed on the deal.

RadioShack collected personal information about millions of consumers and promised the data wouldn’t be sold, the agency said in a letter dated May 16 that was made public Monday.

“Consumers provided personal information to RadioShack with the expectation that RadioShack might use it, for example, to make new offers of interest to consumers, but not to sell or rent it,” Jessica Rich, the head of the FTC’s consumer protection bureau, wrote in a letter to a privacy ombudsman appointed by the bankruptcy court.

Standard General LP won an auction for RadioShack’s assets, beating 16 other bidders. It agreed to pay $26.2 million for the chain’s name and intellectual property. The sale of the electronics retailer’s customer data has drawn objections from 37 state attorneys general.

Standard General has been in talks with the FTC and state officials about how to resolve the privacy concerns, people familiar with the matter said last week. As of Friday, the hedge fund believed it was close to coming to terms on the issue, one of the people said. A hearing to approve the deal takes place Wednesday.

On Monday, Standard General said it’s been working with the states to ensure that customer data is protected. The firm is committed to maintaining RadioShack’s privacy policies, according to a statement.

The FTC has a consumer-protection mandate to enforce against “unfair or deceptive” practices. The agency is recommending conditions on the sale of the RadioShack data that would protect consumers, including that the buyer is in the same line of business as RadioShack and that it agree to be bound by the RadioShack privacy policies that were in place when the data was collected.

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