Tuesday, July 14, 2015

Bankruptcy and Mailing Lists

Walter Block, as he will do, answered a mailbag question via a blog post at LRC. 

The question (edited for length):

Radio Shack…filed for bankruptcy a little while ago, and a controversy had arisen as a result. I’m not certain if you ever shopped there, but if you did you remember that Radio Shack always asked for contact information when making a sale.

Now that the chain has entered bankruptcy, the trustees or executors or whatever you call them have decided to sell this information off. This of course has raised the hackles of customers, privacy advocates, and many others.

Would this information be considered the property of the providers, loaned to the company in return for consideration? Is the information provided as a trade, with limited rights? Does any of that matter if the party responsible for protecting the information is no longer available to act on that protection? Does the responsibility for protection fall back on the information provider then? Or am I looking at this wrong and there is a very simple, libertarian way to look at it?

Block’s response (edited for length), and my thoughts:

In my view, it is illicit to own information (Kinsella, N. Stephan. 2001. “Against Intellectual Property,” Journal of Libertarian Studies, Vol. 15, No. 2, Winter, pp. 1-53). So, let’s forget about the people on that list owning information about themselves.

Why forget about it?  I will admit that the entire topic of IP (and in this case, information) in a libertarian world is confusing to me, almost approaching bizarre.

I see this issue as fully and completely addressed by the contract – explicit, implicit, reliance on past practice, or otherwise (don’t get hung up on lawyers and signatures being the only way to form a valid contract). 

Under what terms did the provider of the information provide the information?  This requires an investigation of facts followed by judgment.  It isn’t a question of libertarian theory or of how many libertarian angels can dance on the head of an intellectual-property pin.  It is a question of contract and establishing the facts.

Where two individuals contract – absent violating the life and property of an uninvolved third-party – anything goes. 

…I don’t think bankruptcy law is compatible with libertarianism. If an entrepreneur is afraid of bankruptcy, let him start a limited liability corporation, so he can have at most only a certain amount of skin in the game.

Why is it not compatible?  Get rid of the word “law” and replace it with contract – although my argument holds equally under both. 

And why is it only valid in case of a limited liability company?  Why not an individual?  A lender lends and a borrower borrows.  Part of their agreement can include procedures to deal with the possibility that the borrower does not repay the lender.  Is it possible that a lender believes that every loan he makes is without risk?  Can he not stipulate terms in case the loan is not repaid?  Can this not be negotiated up front?

A loan without concern of repayment or possibility of default is called a gift.  Ask any lender.

If the lender does not secure such agreements, or if the bankruptcy remedies do not secure 100% of the amount of the loan, why is this a question of libertarian theory?  Call it a poor business practice or poor judgment on the part of the lender.  Nothing in libertarian theory is concerned with the quality of the entrepreneur’s decision.

Note, even in today’s system of state-defined bankruptcy law, my view still holds.  A lender should understand his recourse in case the borrower doesn’t repay the loan.  Part of the recourse is covered via contract and part covered by law.

Let us suppose that Radio Shack has this information on pieces of paper. It owes $1 million to its creditors. They seize all of the property of Radio Shack, including these pieces of paper. The question in my mind boils down to, What may the creditors do with these pieces of paper? May they burn them? Yes. May they look at them? Yes, again. May they mail letters to the people whose names and addresses appear on these pieces of paper? Yes, again…

Maybe.  The creditors may do with the pieces of paper – or the information in whatever form it is held – per the contract under which the information was handed over in the first place.  If there are no stipulations, Block is correct.  If there are stipulations, these must guide if contract is to mean anything (and trying to imagine a libertarian world without contract is…unimaginable).

It is a question of establishing fact and securing judgment.  It is not a question of libertarian theory, beyond that portion of the theory that says I own me and with that self-ownership comes the ability to contract.


  1. Yeah, basically, I'm with you. I say "basically" because neither of us know enough of this case to argue definitively.
    I don't know how the Hell I.P. enters into this. As I remember, as a Radio Shack customer, they would ask for some personal info for mailings, etc. Most of the time I declined to provide this, as is my nature. However, this was completely voluntary. There was no penalty for not providing the info.
    So, it seems to me, that if you give something away, YOU DON'T OWN IT!
    End of issue. The info belongs to whoever picked up the pieces of RS.

    1. I hope I didn't come across as arguing definitively. My point is...whatever was the agreement at the time the information was handed over should control.

      If RS only asked for the info and the customer gave it unconditionally, then the trustee can do whatever it likes with it - as Block suggests.

    2. no arguments with that here