Sports Authority is going to auction off customer emails. Can it do that?

If you were a Sports Authority customer, beware – your data could now belong to Dick's Sporting Goods, following a bankruptcy auction on Thursday. 

Mike Blake/Reuters/File
A Sports Authority store is shown in Encinitas, Calif., in March after the company filed for bankruptcy. This week the company sold the emails of its former customers for $15 million.

Dick's Sporting Goods announced on Thursday that it had won the intellectual property of former sporting goods retailer Sports Authority in an auction, buying the personal information of thousands of former Sports Authority customers. 

Dick's Sporting Goods paid just $15 million for Sports Authority's intellectual property, a minuscule sum for ensuring that Dick's can corner the market for sporting goods sales in the United States. Dick's shares rose 6 percent after the sale.

Although consumers have become more wary of how their data is used by large retailers (particularly after high profile data breaches at companies such as Target), many are still unaware that their information could come up for sale when companies such as Sports Authority go bankrupt.

"Customer emails are stolen every day [but] they lack awareness that this is a possibility," Hemu Nigram, a cybersecurity expert, told The Los Angeles Times. "The auction is raising awareness of another way customer data can be sold without even thinking about it."

Sports Authority filed for Chapter 11 bankruptcy in March, forcing it to auction off assets in order to pay creditors – assets that include customer files and email addresses.

Thursday's auction saw 114 million customer files and 25 million email addresses pass into Dick's Sporting Goods' hands, a purchase that experts say could help Dick's target potential customers in regions formerly dominated by Sports Authority.

"It's extremely valuable data for companies to identify customers who are looking for a new home," Nigram told The L.A. Times, speaking to the value of data sales for companies seeking to dominate the same market.

While selling consumer information at auction is technically legal, if companies have already stated that any data they collect could be sold. Sports Authority had such a policy.

And the sporting goods company is not the only one. When Radio Shack underwent bankruptcy proceedings last year, the company attempted to sell consumer information despite a privacy policy that guaranteed that such information would not be sold.

Finally, after backlash from the Federal Trade Commission and from several of its suppliers, Radio Shack agreed to destroy most of the records it held for its 117 million customers.

"This settlement is a victory for consumer privacy nationwide," said Texas attorney general Ken Paxton, according to CNN. "It reflects a growing understanding of the importance of safeguarding customer information."

Nevertheless, some consumer information (though limited), was passed on to General Wireless, which purchased Radio Shack's assets at auction.

Consumer privacy advocates say that this sale is part of a chilling trend toward data sales. According to a 2014 CBS News report, data brokers are selling consumer information far more often than most consumers realize.

Companies know most things about you, experts say, from what medications you are on to what clothes you like to wear. And "the type of company that would be most entertained by that information is most likely to exploit it," privacy attorney Jay Edelson told The L.A. Times. "Whether it's identity theft or a scheme to defraud people by selling other things to them or reselling that list."

Companies are well aware of the value of this strange asset, which can direct them to new customers or help target interests. There was more than one bidder for Sports Authority's customer information. Sports Direct International Plc (a British company) also submitted a bid for the customer information, offering $13 million.

Dick's and Sports Authority still have to finalize the deal, and a US bankruptcy court judge has to approve it, the company said in a regulatory filing. The court's hearing is scheduled for July 15.

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