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This is Planet

0:26

Money from NPR.

0:28

Who am I? Oh, come on. And oh,

0:30

I see. I'm your auntie. This is my

0:33

aunt, Vovey. I called her up to

0:35

talk about an experience she had

0:37

a few years ago with the

0:40

genetics testing company 23 and me.

0:42

Vovey is a lifelong learner. She

0:44

loves anthropology and the story of

0:47

human migration. So back in 2017,

0:49

when 23 and me was all

0:51

the rage, she was interested. She

0:54

thought that taking one of their

0:56

tests might reveal how she fit

0:58

into the evolutionary sweep of human

1:01

history. So was part of the

1:03

interest about using 23 and

1:05

me about? Belonging. Maybe belonging

1:07

to a much larger collective.

1:09

Amphovee knew our family had

1:11

been in Afghanistan for the last

1:13

few hundred years, but she also

1:16

wondered if this test might reveal

1:18

the migration route our ancestors

1:20

had taken out of Africa. She

1:22

wondered if it might uncover some

1:25

long-forgotten tale of star-cross travelers on the

1:27

Silk Road. And so I bought a

1:29

kit and I convinced some of my

1:31

friends to do so as well. You were

1:33

patient zero. Yeah. Vovey and I actually

1:36

talked about this at the time.

1:38

By handing over her genome, she

1:40

was automatically giving this company part of

1:42

my DNA. After all, we share 25%

1:44

of the same genome. And for me,

1:46

it just wasn't clear what the consequences

1:48

of all this might be. But Vovey's

1:50

gonna Vovey, and she spent about

1:52

a hundred bucks, spit into a test

1:54

tube, and sent it off to the

1:56

company. And even though she is the

1:58

most cautious person, I know. when Aunt

2:00

Vovey's test results arrived, she

2:03

says they were pretty exciting

2:05

in these terms and conditions.

2:08

Yeah, I just probably said

2:10

agreed without really reading the

2:13

fine print. Well, that's daily

2:15

life. Who has time for like

2:18

a 250-page memo? And when Aunt

2:20

Vovey's test results arrived,

2:22

she says they were pretty

2:25

exciting. They said we had some Mongolian

2:27

DNA and a little bit from Yakutsk

2:29

all the way up in Siberia. Then

2:31

there was this thing that in the

2:33

1800s or so that there had been

2:36

some DNA from Great Britain. That was

2:38

a total shock and surprise. Well there

2:40

were several wars in Afghanistan in

2:42

the 1800s. Yes, and that was

2:44

sort of a confirmation of yes, of

2:47

course these things happened. A mysterious

2:49

British interloper in the genome?

2:51

This was the kind of hot

2:53

ancestral goss Vovey had been hoping

2:55

for. But then, not too long after,

2:58

Vovey got an update from 23 and

3:00

me. That's because the database was

3:02

growing. As the company got

3:04

more customers and more genetic

3:06

data points, they were apparently

3:09

updating their genetic results from

3:11

time to time. And the new

3:13

update had come to a much

3:15

less complicated conclusion about Vovey's origins.

3:17

So it just said that I

3:19

was 99.8% Afghan, basically. Vovey

3:22

was a bit taken back by this.

3:24

After this string of intriguing genetic

3:26

subplots, finding out her genome reflected

3:28

the one place she'd known about

3:30

all along felt a little bit

3:33

like a letdown. And the

3:35

British interloper had disappeared?

3:37

Yeah, completely. The British interloper,

3:40

all the Mongolian markers, you

3:42

know, all of those disappeared

3:44

and there was actually no

3:47

indiscretions? Yeah. I had been

3:49

hoping to, for many, in

3:51

discretions, maybe, I was hoping

3:54

for a little more surprise.

3:56

Avovia had been looking for the

3:58

real housewives. of the Silk Road

4:01

in her genome, but at the end

4:03

of her journey of genetic self-discovery, she

4:05

basically learned, I am what I am.

4:07

After that, Vovey stopped visiting the

4:10

website, and for a few years,

4:12

she basically forgot about 23 and me.

4:14

Until she found out that 23 and me

4:16

had made her part of a different gene

4:19

pool, a group of people whose genetic

4:21

information is about to go on

4:23

the market. When did you first hear

4:25

that something might be financially awry at

4:28

23 and me? I'm just last week.

4:30

I had no idea because as I

4:32

said, I haven't gone back to look

4:34

at anything for a few years now.

4:36

Vovey found out along with the rest

4:38

of us that 23 and me had

4:40

filed for bankruptcy. And the data on

4:42

Aunt Vovey's genome, along with the

4:44

genomes of millions of other 23

4:47

and me customers, was potentially up

4:49

for sale. And it's not like

4:51

23 and me is thinking of

4:53

selling your shopping preferences for shoes

4:56

or something. These are the blueprints

4:58

our bodies used to build

5:00

themselves. And Fovey read that

5:03

23 and me's website was

5:05

crashing because so many customers

5:07

were rushing to delete their

5:09

highly sensitive data. Yeah, it was

5:11

like a run on the gene bank. All

5:13

of which obviously raised some

5:15

big questions for Antfovey.

5:18

Like now that 23 and me was

5:20

in bankruptcy, was it allowed to just

5:22

sell her genetic information? Who would want

5:24

to buy it? Could that information affect

5:27

things like insurance premiums? Could it end

5:29

up in the hands of law enforcement

5:31

or a foreign owned company? And what

5:33

about the data itself? How is that

5:35

going to be broken into valuable assets?

5:37

Was that going to be sold to

5:39

the highest bidder? And how much is

5:41

my data even worth? Hello

5:44

and welcome to Planet Money. I'm Alexei

5:46

Morowitz Gossi and I'm Jeff Guo, and

5:48

Alexei's Aunt Vovey isn't the only one

5:51

asking these questions these days. Over the

5:53

past two decades, some 15 million people

5:55

have spit into a tube and handed

5:58

over their entire genome to one cylinder.

6:00

Silicon Valley Company, which now has

6:02

one of the biggest genetic databases

6:04

on Earth. Today on the show,

6:06

what might happen to Vovey's genetic

6:08

data as 23 and me works

6:10

its way through the bankruptcy process,

6:12

and what it all reveals about

6:14

the data that all of us

6:16

willingly hand over to companies every

6:18

single day. This

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This message This message comes from Charles

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Schwab. When it comes to managing your

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wealth, Schwab gives you more choices, like

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you need it. You can also invest

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on your own and trade on Think

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or Swim. Visit schwab.com to learn more. might

7:14

happen to Aunt Vovey's genetic data

7:16

and the data of millions of

7:18

other people, we need to understand

7:20

exactly how we got here. How

7:22

did 23 and me find itself

7:24

in bankruptcy in bankruptcy? 23

7:26

and me was founded in part on

7:28

the idea that if they could build

7:30

a massive database of consumer data, they'd

7:33

be able to figure out how to

7:35

monetize it down the road. And the

7:37

company was successful at building this data

7:39

set. Over the past couple decades, some

7:41

15 million customers have sent their DNA

7:43

to 23 and me. But the company

7:45

never figured out a way to make

7:48

a profit, because 23 and me customers

7:50

were kind of set after they took

7:52

the test once. And 23 in me's

7:54

efforts to use all this genetic data

7:56

to develop and sell new drugs hadn't

7:59

yet panned out. Then, in 2023, they

8:01

were hit with a massive data breach

8:03

that led to class action lawsuits. All

8:05

these problems helped push the company into

8:07

bankruptcy. By the way, we reached out to

8:10

23 and me, but they didn't get back to us.

8:12

All of which brings us to our

8:14

next question. What's going to happen to

8:16

my Antvovey's data now? See, bankruptcy

8:18

is a very specific process, with

8:20

some very specific goals. And how

8:22

that process plays out here could

8:24

have a real impact on what

8:27

ends up happening to Antphovey's genetic

8:29

data. To get some answers, we called

8:31

up Laura Cortis, who teaches bankruptcy

8:33

law at Arizona State University.

8:36

What's your favorite bankruptcy? I

8:38

don't know. That's like choosing

8:40

between children or something. Last month,

8:42

23 and me filed for Chapter 11

8:44

bankruptcy. Chapter 11, Laura says, is all

8:46

about finding ways for a struggling company

8:48

to stay in business. It allows a

8:51

company to hit the pause button on

8:53

all of its debts and lawsuits and

8:55

come up with a new plan, either

8:57

to restructure or to sell itself to

8:59

someone else. And the idea behind Chapter

9:01

11 goes back to the big railroads

9:03

of the 19th century. Back then, you

9:05

had all these different railroad companies that

9:08

were failing all the time, leaving a

9:10

lot of debt that they owed to

9:12

other people or other companies. So

9:14

Congress... tried to come up with

9:16

the best way to get all

9:18

those creditors paid back without destroying

9:20

the actual value of the company. Because

9:23

it's going to be much more

9:25

valuable if we keep it going

9:27

as a railroad than if we

9:29

halt everything, halt operations and start

9:31

like cutting up pieces of track and

9:33

saying to a creditor, okay, you get

9:36

six feet of track. You get the

9:38

caboose. Anyway, the bankruptcy system is

9:40

aimed at maximizing the value of the

9:42

bankrupt company. And in doing so, it's

9:45

supposed to produce a sort of win,

9:47

win, win. Yeah, the railroad company gets

9:49

to survive instead of getting ripped apart

9:51

and sold for scrap. Some of the

9:54

company's employees get to keep their jobs.

9:56

And some of the customers will continue

9:58

to get a valuable. which is, you

10:00

know, to ride the railroads of America.

10:03

And the creditors, they will get made

10:05

as close to whole as possible. And you

10:07

can think of the bankruptcy process

10:09

as this giant trade-off machine. It's

10:12

about taking what could be a

10:14

messy fight between the various parties

10:16

the company owes money to and

10:18

forcing everyone to come to an

10:20

agreement, to compromise. And in this

10:22

compromise, everyone basically has to accept

10:25

some losses, because, as we said,

10:27

the company is often more valuable

10:29

intact than in pieces. And if

10:31

that means that some contracts are

10:33

not honored or some pool of

10:35

investors don't get paid back, well,

10:38

that is just the cost of

10:40

not going out of business. In

10:42

the case of 23 and me,

10:44

the potentially really valuable asset isn't

10:46

railroad lines. It's genetic data from

10:49

customers like Aunt Vove. Now, the

10:51

United States doesn't really have strong

10:53

federal laws protecting privacy. Europe and

10:55

some states like California and Illinois

10:58

do. But what 23&M customers do

11:00

have is a contract with the

11:02

company. They have this privacy agreement

11:04

where they were promised certain protections.

11:06

So one of the big questions

11:08

here is how will those privacy

11:10

protections fare in the, you know,

11:12

thunderdome of the bankruptcy process? Is

11:15

this the first time that bankruptcy

11:17

law met? consumer data privacy? No,

11:19

not at all. This has been

11:21

going on for a while. Laura

11:23

says there's one particularly important case

11:25

from back in the year 2000,

11:27

when consumer data privacy and the

11:29

bankruptcy system collided. A case that

11:32

sort of set the foundation for

11:34

the rules around these data sales.

11:36

Is it toy smart or toy smart?

11:38

I always think of it as toy smart,

11:40

like smart toys. Toy smarter, not

11:42

harder. Yeah! Toy Smart was an online

11:45

toy retailer that crashed when the dot-com

11:47

bubble burst. As part of their bankruptcy

11:49

filings, the company announced its intention to

11:51

sell off the names and contact information

11:54

of its customers. Those lists could be

11:56

valuable to other companies trying to find

11:58

their own new customers. But that announcement

12:01

raised two big problems. First,

12:03

Toy Smart's terms of service had

12:05

expressly promised its customers that their

12:07

data would not be sold to

12:09

any third parties. And second, Toy

12:12

Smart's customer lists contain details about

12:14

some of the kids who got

12:16

toys there. there's this concern about

12:18

we're going to be selling the

12:20

data of children to potentially anybody,

12:22

right? Not even necessarily a toy

12:24

manufacturer. And I think that raised

12:26

a lot of red flags. In

12:28

light of those red flags, the

12:30

Federal Trade Commission, which is one

12:33

of the main consumer protection agencies,

12:35

they sued to block the proposed

12:37

sale of that data. They said

12:39

that ToySmart was breaking their privacy

12:41

policy and engaging in a deceptive

12:43

business practice. Eventually, though, the FTC...

12:45

Toy Smart came to a settlement,

12:48

a set of conditions under which

12:50

the company would be allowed to

12:52

sell its customer data. The FTC

12:54

did want bankrupt companies to be

12:56

able to maximize their value, but

12:58

they also didn't want customers to

13:00

suffer too much harm by letting

13:02

Toy Smart break their data privacy

13:04

promise. So they came up with

13:06

this new trade-off to let Toy

13:09

Smart sell its customer data, but

13:11

with a few guardrails, a few

13:13

conditions. Condition number one. The customer

13:15

information can't be sold by itself. It

13:17

has to be sold as part of

13:19

the Toy Smart business. Condition number two

13:21

was that Toy Smart was only allowed

13:24

to sell the data to a company

13:26

in a related industry that agreed to

13:28

uphold the terms of the original privacy

13:30

policy. This is what the FTC called a

13:32

qualified buyer. The thinking was customers

13:34

had given up their data in order

13:36

to improve their toy buying experience, so

13:38

they shouldn't have to worry about how

13:40

it might be used by some other

13:42

kind of company. In striking this deal,

13:45

the Toy Smart case kind of

13:47

set a precedent. It had already

13:49

been a norm in bankruptcy that

13:52

contracts with vendors or employees or

13:54

creditors could be renegotiated. Toy Smart

13:56

established that in the interest of

13:58

maximizing value, consumer... data privacy was

14:01

also something that could be on

14:03

the negotiating table. And so these

14:05

toy smart guidelines kind of became

14:07

the blueprint for other companies seeking

14:09

to sell their data and bankruptcy.

14:11

And I think today, data sales

14:13

and bankruptcy adopt a lot of

14:15

the facets of the toy smart

14:17

settlement. So in the case of 23 in

14:20

me, the question of whether or not

14:22

the company is allowed to sell my

14:24

Aunt Vovey's genome is much clearer. In

14:26

the years after ToySmart, it became a

14:28

pretty standard practice for companies to reserve

14:30

the right to sell customer data in

14:32

case of bankruptcy. And that language was

14:34

right in the privacy policy that Vovey

14:36

kind of ignored when she signed up. So

14:38

it looks like Antvovey's data, unfortunately,

14:41

is going to be sold

14:43

in this bankruptcy process. Now, 23

14:45

and me has already said that

14:47

any potential buyers will have to

14:49

uphold their current privacy policy, but

14:51

the shape of that final deal,

14:53

that will be determined by a

14:55

bigger negotiation. Now, consumers are not

14:58

generally invited to the bankruptcy negotiating

15:00

table. So Antvovey won't be getting

15:02

a seat here. But Laura says

15:05

often there is a dedicated person

15:07

tasked by the bankruptcy court with

15:09

advocating on behalf of consumers' privacy

15:12

rights. Yes, the consumer privacy ombudsman

15:14

or the CPO is what they're

15:16

called. We love our acronyms in

15:18

bankruptcy. Same at Planet Money or

15:21

PM as we sometimes call it.

15:23

We really do. HG. Anyway, the

15:25

CPO or the Consumer Privacy Ombudsman,

15:27

this was a position created by

15:29

Congress about 20 years ago. There

15:31

was a time when more and

15:33

more companies were building their businesses

15:35

around collecting consumer data. And as

15:37

some of these companies went under,

15:40

more and more of these data

15:42

sets were ending up on the

15:44

bankruptcy auction block. The ToySmart case

15:46

had established some rough guidelines for

15:48

these situations, but in subsequent cases,

15:51

it became clear that no one

15:53

in the bankruptcy system really had

15:55

the expertise or incentives to dedicate

15:57

themselves to, you know, scrutinizing the

16:00

privacy. implications This

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