The Bankruptcy Fire Sale: Who Owns Your Data When Companies Fail?
AI-generated image · Bay Street Wire
As insolvencies rise, consumer data is becoming a primary asset in corporate liquidations. From retail histories to genetic profiles, the 'receipts' of consumer loyalty are being monetized.
Q: What is the current trend regarding consumer data in company insolvency cases?
A: As CityNews Toronto first reported, consumer data is increasingly viewed as a lucrative asset during insolvencies. Dina Kovacevic, editor of the Insolvency Insider newsletter, describes data as the "currency" of these transactions and notes that the issue will become more relevant as more types of information are sold.
Q: Can you provide a specific example of a recent retail deal where this occurred?
A: CityNews Toronto reports that when Toys “R” Us Canada sold its branding in June, the deal included the transfer of consumer data. The purchaser was an affiliate of Ad Populum—the firm that owns Party City and manages the Elvis Presley attraction Graceland and the Chia Pet brand. The data transferred included account information, names, contact details, communications with Toys “R” Us Canada, and transaction histories. Additionally, an affiliate called Next Century announced it would open Toys “R” Us Canada departments inside Staples Canada locations starting Nov. 14.
Q: How transparent is the process for consumers when their data is sold during a bankruptcy?
A: CityNews Toronto notes that customers often only discover their data has been sold after receiving a notification letter that allows them to request the deletion of their information. Constantine Karbaliotis, counsel at nNovation LLP, stated that the Canadian system is not as transparent as the U.S. system, where consumer groups and attorneys general are more likely to intervene before a sale.
Q: Are there examples of high-stakes data sales in the United States?
A: Yes. CityNews Toronto highlights two significant U.S. cases. First, Google offered US$10 million for Spirit Airlines data, which reportedly consists of 500 million Microsoft Teams messages, 100 million emails, and employee records, intended for training AI systems. Second, the genetic testing firm 23andMe put its consumer data up for sale during bankruptcy. This move was contested by the District of Columbia and 27 states, who argued that genetic data is too sensitive to transfer without informed consent, though a U.S. court eventually approved the deal.
Q: Why is consumer data so valuable to the firms buying these assets?
A: As reported by CityNews Toronto, purchasing existing databases of phone numbers, addresses, and emails allows firms to avoid building a consumer base from scratch. For buyers attempting to revamp a failing business, this data facilitates a more seamless transition.