RadioShack Bankruptcy To Test Shelf Life of Privacy Vows

April 3, 2015 – In The News

Scott L. Vernick was quoted in the Law360 article, “RadioShack Bankruptcy To Test Shelf Life of Privacy Vows.” Full text can be found in the April 3, 2015, issue, but a synopsis is below.

RadioShack Corp.’s bankruptcy will test whether privacy promises made to customers live on after a business has collapsed, as state regulators have objected to the company’s potential sale of personal data of as many as 117 million customers.

By raising objections, the state attorneys general have brought to the forefront the issue of how broadly representations to consumers about what will be done with their data can be applied.

RadioShack could potentially counter that the promise it made to not sell customer data applied only to activities while in operation, and not to sales necessitated by bankruptcy or a merger.

"The idea in privacy policies that you aren't going to sell data usually means you aren't selling it to third parties like data brokers without telling the customer," said Scott Vernick, a noted privacy attorney. "Outward-facing privacy policies to consumers were never designed to prevent the transfer of data if a company had to sell all of its assets. That's not what the policies were designed to protect."

The RadioShack case is just the latest reminder that companies should ensure a bankruptcy scenario is explicitly mentioned in any privacy policy that could later be scrutinized by regulators.

"What may happen now is that these policies would be reworded more carefully in light of the concerns expressed by the regulators in the RadioShack proceedings to say there may be an exception to a promise not to sell customer data for the sale of the company or all or essentially all of its assets," Vernick said.

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