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How the FTC is trying to protect shopper data caught up in Radioshack’s bankruptcy

File: A person rides by a Radio Shack store in San Francisco.  (Photo by Justin Sullivan/Getty Images)

RadioShack's financial demise may leave techies with one less place to buy gizmos and their information on the auction block: Customer data that the retailer collected over decades was among the assets for sale to the higher bidder as part of RadioShack's bankruptcy.

Tens of millions of customer records are up for sale, including more than 66 million containing information about the physical addresses of shoppers and 8 million associated with e-mails along with "transaction data," according to the Associated Press -- despite promises not to sell data to third parties in the company's privacy policy.

The move drew objections from dozens of state attorneys general and companies like AT&T and Apple, which partnered with the retailer to market their products. And now the government's privacy watchdog, the Federal Trade Commission, has weighed in with a letter to court-appointed consumer privacy ombudsman in the bankruptcy case.

"We understand that RadioShack’s customer information constitutes a potentially valuable asset," FTC Consumer Protection Bureau chief Jessica Rich wrote. We are concerned, however, that a sale or transfer of the personal information of RadioShack’s customers would contravene RadioShack’s express promise not to sell or rent such information and could constitute a deceptive or unfair practice under Section 5 of the FTC Act."

[Bankrupt RadioShack wants to sell off user data. But the bigger risk is if a Facebook or Google goes bust.]

Hedge fund Standard General,  which bought 1,743 of RadioShack's store leases this spring and intends to co-brand them with with Sprint, led the bidding for the now defunct retailer's brand name along with other intellectual property including the customer data trove. But the deal still must be approved by a Delaware bankruptcy court. A hearing for the process is set for later this week.

"The firm has been working with the state attorneys general to ensure that the customer data is protected, and has committed to maintain RadioShack's strict privacy policies," a Standard General spokesman told the Post.

The FTC isn't asking the court to kill the deal, but it is recommending conditions it argues could help consumers’ privacy. For instance, the FTC wants the data to be sold as part of a larger deal, not as a standalone asset.

The agency also wants the buyer to be in the same line of business as RadioShack and agree to adhere to the terms of RadioShack's privacy policy -- as well as get "affirmative consent" from consumers before making changes to the policy that affect data collected by RadioShack.

These terms are similar the ones laid out in a settlement FTC reached with online retailer Toysmart.com about the potential bankruptcy sale of its data in violation of its privacy policy back in 2000. The data in that case, which involved names, addresses, billing information, shopping preferences and family profiles, including the names and birth dates of children, was eventually destroyed. The agency has also sent letters about proposed data sales in the bankruptcies of other companies, such as Borders and XY Magazine.

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