Selling At Retail: RadioShack's Attempt To Sell Customer Data Meets Resistance

March 27, 2015

By now most everyone knows that RadioShack’s Chapter 11 bankruptcy was designed to be a pre-packaged asset sale. That sounded pretty benign when we were talking about the sale or auction of store leases to companies like Sprint, but it turns out data is an asset too. And customer data is the most highly prized at all.

Bloomberg reported today that RadioShack’s 100 million customer database is a planned part of the asset auction. That database includes names, email addresses and phone numbers of people who have bought something at the Shack.

Two legal filings have been submitted to prevent that sale, including one by the Texas State Attorney General’s office, which argues that it breaches the company’s statement that it prides itself on “not selling our private mailing list.”

The problem is that any promises made by the RadioShack entity are as good as their promises to pay their creditors: that is to say, pretty much null and void unless the presiding judge and / or creditor’s committee agrees to honor them.

The other complication that must be addressed is: given that RadioShack was acting as a selling agent for AT&T and other mobile phone providers, is the data even theirs to sell in the first place? AT&T argues no. It’s a really murky issue.

Back in the 1990’s this was not a complicated question. Anything and everything that was part of the “estate” (the depressing term given to a defunct company) was available for sale. I personally worked for a bankrupt company that sold its mailing list to at least one, if not two buyers. But that was before data privacy and theft became the hot topic it is today.

According to Bloomberg, in 2000, the FTC sued to stop a bankrupt dot-com company, from selling what was considered the company’s most valuable asset, its customer database. The database was later destroyed.

In 2011, the FTC apparently reversed itself and agreed not to block the sale of Borders customer database, ruling that “bankruptcy is a special case.” This is actually more in line with the traditional attitude towards bankruptcies (especially Chapter 7’s, but certainly extending to Chapter 11’s).

I’m not a lawyer, but I have lived through several bankruptcies. Nothing was off-limits to the “estate sale.” From furniture, to fixtures, to cash registers and computers…”everything must go.”

This is an interesting object lesson for retailers. My partner Brian Kilcourse has said for years that retailers really need to start thinking about their “information assets.” Technology companies generally have clauses in their contracts that prohibit assignment of ownership to another party except during a merger or acquisition. In other words, they protect themselves. The data held within those applications…the REAL assets however, are subject to no such rules and regulations.

The pure eagerness with which the estate is willing to sell these information assets and the response requesting disallowing that sale show just how important information assets are today. We would wish more retailers would recognize that value while their companies are alive, rather than watch the courts fighting over them after they’re gone.

Contributor: Paula Rosenblum

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