Protecting Privacy of Customer Personal Information in Borders Bankruptcy Asset Sales

As part of the Borders bankruptcy proceeding, Barnes & Noble offered to purchase the “consumer personal information” of Borders, including over 20 million customers’ online account information, e–mail addresses, and purchase history. However, Borders had a privacy policy that stated customer personal information would not be rented or sold to third parties except with the express consent of its customers.

According to a Federal Trade Commission letter dated September 14, 2011, about this matter, Borders’s database includes customer personal information collected since May 2005. Borders had several versions of its privacy policies, and their privacy policy was revised May 27, 2008, to include an exception for disclosing customer personal information as part of a merger, reorganization, or sale of its assets. The FTC letter recommends that Borders obtain express consent from its customers before transferring a customer’s personal information to a potential purchaser (e.g., Barnes & Noble). If a customer does not consent, the FTC recommends that the customer’s data be purged. The FTC letter cited the FTC v. Toysmart case as a similar situation involving the transfer of customer personal information in a bankruptcy proceeding.

The third–party Consumer Privacy Ombudsman in this matter recommended that Barnes & Noble comply with Borders’s privacy policy by getting consent of the Borders customers. According to a September 21, 2011, Reuters article, “Barnes & Noble rejected the consent requirement as ‘completely unrealistic.’ ” As the Reuters article points out, this could decrease the value of the customer personal information that Barnes & Noble offered to purchase, and it might end the deal. It will be interesting to watch how these important consumer privacy issues are resolved.

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