On Monday the Federal Trade Commission (FTC) sent a letter to the bankruptcy court presiding over RadioShack's supervised asset sell-off suggesting a compromise that would allow RadioShack to sell its database of information from 117 million customers.

Further Reading Apple asks court to block the sale of some RadioShack data

The sale of the data—which includes names, addresses, e-mail addresses, phone numbers, and purchase histories—has caused concern among consumer protection advocates. The states of Tennessee and Texas recently filed objections to RadioShack's plan to find a buyer for its database, saying that the company promised in various privacy policies that it would not resell customer data to third parties. AT&T and Apple also objected to the sale of portions of the database, saying that that information actually belongs to them and not to RadioShack as per RadioShack's business agreements with those companies.

According to FTC Consumer Protection Director Jessica Rich (PDF), RadioShack could find a way to appease consumer advocates by taking a look at a bankruptcy case from 2000 involving retailer Toysmart. In that case, Toysmart had wanted to sell off its database of customer data, but after some pushback from the FTC it agreed to certain limitations on the sale of the database. For example, the buyer could not buy the customer database alone—it had to receive it bundled in with the sale of other assets like trademarks or Web content. In addition, the information had to be sold to a business similar to Toysmart and that buyer had to agree to honor the privacy policy that Toysmart had pledged to its customers.

“We have similar concerns about the potential deceptive nature of the transfer of customer information in this case,” Rich wrote in her letter. “We recognize, however, that bankruptcy presents special circumstances, including the interest in allowing a company to get back on its feet—or alternatively, to marshal remaining assets for its creditors—consistent with any promises made to customers.” Rich continued:

As in Toysmart, our concerns about the transfer of customer information inconsistent with privacy promises would be greatly diminished if the following conditions were met: The customer information is not sold as a standalone asset;

The buyer is engaged in substantially the same lines of business as RadioShack;

The buyer expressly agrees to be bound by and adhere to the terms of RadioShack’s privacy policies as to the personal information acquired from RadioShack; and

The buyer agrees to obtain affirmative consent from consumers for any material changes to the policy that affect information collected under the RadioShack policies.

Rich added that if RadioShack can't meet these conditions, it ought to receive "affirmative consent" from each of its customers in the database before selling their information to a third party.

The FTC's compromise suggestion does not seem to address the concerns of Apple and AT&T, which are claiming rights to information gathered through sales of iPhones and AT&T services respectively. Last week, hedge fund Standard General made a winning bid of $26.2 million to buy RadioShack's name, its customer data, and its remaining assets. A hearing is scheduled for May 20 to determine whether the customer data can be sold to the hedge fund.