Laura Cordes
Appearances
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
But whether or not any of this is performative, the CPO process can also be really expensive. And so there's also a lot of pressure against appointing a CPO at all.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
The default here is that there is no CPO unless a privacy policy is being expressly broken in a sale. If some party in the bankruptcy requests a CPO, then it's up to the court to decide to appoint one.
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How 23andMe's bankruptcy led to a run on the gene bank
Okay, so that is the basic framework that a bankruptcy court is using to sell Aunt Vovey's genome. After the break, who might actually end up buying 23andMe's genetic database? Could it be a foreign-owned tech company? Ah! A law enforcement agency? Oh, no. And will Aunt Vovey choose to stay or to delete her genetic data forever?
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How 23andMe's bankruptcy led to a run on the gene bank
If a company decides to use Chapter 11 bankruptcy to sell itself off to a new buyer, Melissa reminds us that a big part of the process is about finding the right kind of buyer who will pay, you know, the highest price.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
Which brings us back to Aunt Vovey's question about who might buy this data and whether she should be worried. We talked through some options with Melissa, and she reminded us that a bankruptcy acquisition is still subject to all sorts of legal scrutiny.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
Melissa says, OK, that question would likely fall to the Committee on Foreign Investment in the United States, or CFIUS, as we acronym obsessives like to call it. Actually, everyone calls it that. This agency vets foreign investments in the U.S. for national security concerns. And it can recommend that a deal be blocked.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
As for, you know, the more likely bidders in this case, at this point, we know that 23andMe's co-founder and former CEO, Ann Wojcicki, has expressed interest in buying the company. In fact, she stepped down as CEO last month with the stated goal of making a bid for it in bankruptcy.
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How 23andMe's bankruptcy led to a run on the gene bank
But there's another way of looking at Aunt Voli's question about whether or not she should be worried. Because no matter who buys 23andMe, there's still the question of what they could do with all this genetic data. Like, what do the actual laws say? Legally speaking, what could a new owner get away with? And what's not allowed?
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
But there's also a world in which the company that ends up buying 23andMe's genetic database ends up sharing it with third parties or using it in ways that its customers probably wouldn't have agreed to when they, you know, originally spit into those tubes and sent them in.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
But even if a new buyer changes the privacy policy, it's not like they could just do anything with ANFOVI's data. Glenn says there are some legal protections that might apply here. Now, Aunt Vovey's genetic data is not considered privileged health information, which would be covered by HIPAA.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
That's because HIPAA is for health care providers like doctors and hospitals, not consumer facing companies like 23andMe. But he explained that there is one federal law that is meant to prevent abuses of specifically this kind of genetic data. It's called the Genetic Information Nondiscrimination Act or GINA.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
Still, Glenn points out that GINA is a relatively narrow law. It does not apply to life insurance or disability insurance. Those companies could still potentially change their coverage based on this genetic information. And also, there are just still a lot of unknown potential consequences to allowing your genetic data to circulate on the market.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
Which puts 23andMe in this kind of ironic position, right? The very same customer privacy policy that gave them the right to sell their customers' data also gives their customers the right to, you know, boop, delete themselves.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
And every customer that removes themselves from this database makes it a tiny bit less valuable as an asset in bankruptcy, which, for 23andMe, makes closing this bankruptcy sale as quickly as possible even more urgent.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
This episode was produced by Sylvie Douglas. It was edited by Jess Jang, fact-checked by Tyler Jones, and engineered by Harry Paul and Neil Rauch. Alex Goldmark is our executive producer.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
I'm Alexi Horowitz-Ghazi. And I'm Jeff Guo. And Alexi's Aunt Vovey isn't the only one asking these questions these days. Over the past two decades, some 15 million people have spit into a tube and handed over their entire genome to one Silicon Valley company, which now has one of the biggest genetic databases on Earth.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
So to understand what might happen to Aunt Vovey's genetic data and the data of millions of other people, we need to understand exactly how we got here. How did 23andMe find itself in bankruptcy?
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
But the company never figured out a way to make a profit because 23andMe customers were kind of set after they took the test once. And 23andMe's efforts to use all this genetic data to develop and sell new drugs hadn't yet panned out. Then in 2023, they were hit with a massive data breach that led to class action lawsuits. All these problems helped push the company into bankruptcy.
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How 23andMe's bankruptcy led to a run on the gene bank
By the way, we reached out to 23andMe, but they didn't get back to us.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
To get some answers, we called up Laura Cordes, who teaches bankruptcy law at Arizona State University. What's your favorite bankruptcy?
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How 23andMe's bankruptcy led to a run on the gene bank
And the idea behind Chapter 11 goes back to the big railroads of the 19th century. Back then, you had all these different railroad companies that were failing all the time, leaving a lot of debt that they owed to other people, other companies. So Congress tried to come up with the best way to get all those creditors paid back without destroying the actual value of the company.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
Yeah, the railroad company gets to survive instead of getting ripped apart and sold for scrap. Some of the company's employees get to keep their jobs. And some of the customers will continue to get a valuable service, which is, you know, to ride the railroads of America. And the creditors, they will get made as close to whole as possible.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
And in this compromise, everyone basically has to accept some losses because, as we said, the company is often more valuable intact than in pieces. And if that means that some contracts are not honored or some pool of investors don't get paid back, Well, that is just the cost of not going out of business.
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How 23andMe's bankruptcy led to a run on the gene bank
But what 23andMe customers do have is a contract with the company. They have this privacy agreement where they were promised certain protections. So one of the big questions here is how will those privacy protections fare in the, you know, thunderdome of the bankruptcy process?
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How 23andMe's bankruptcy led to a run on the gene bank
Laura says there's one particularly important case from back in the year 2000 when consumer data privacy and the bankruptcy system collided. A case that sort of set the foundation for the rules around these data sales. Is it toy smart or toy smart?
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
But that announcement raised two big problems. First, ToySmart's terms of service had expressly promised its customers that their data would not be sold to any third parties. And second, ToySmart's customer lists contain details about, you know, some of the kids who got toys there.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
Eventually, though, the FTC and ToySmart came to a settlement, a set of conditions under which the company would be allowed to sell its customer data.
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How 23andMe's bankruptcy led to a run on the gene bank
So they came up with this new trade-off to let ToySmart sell its customer data But with a few guardrails, a few conditions. Condition number one.
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How 23andMe's bankruptcy led to a run on the gene bank
In striking this deal, the ToySmart case kind of set a precedent. It had already been a norm in bankruptcy that contracts with vendors or employees or creditors could be, you know, renegotiated. ToySmart established that in the interest of maximizing value, consumer data privacy was also something that could be on the negotiating table.
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How 23andMe's bankruptcy led to a run on the gene bank
So it looks like Aunt Vovey's data, unfortunately, is going to be sold in this bankruptcy process. Now, 23andMe has already said that any potential buyers will have to uphold their current privacy policy. But the shape of that final deal, that will be determined by a bigger negotiation.
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How 23andMe's bankruptcy led to a run on the gene bank
We really do, HG. Anyway, the CPO, or the Consumer Privacy Ombudsman, this was a position created by Congress about 20 years ago. It was a time when more and more companies were building their businesses around collecting consumer data. And as some of these companies went under, more and more of these data sets were ending up on the bankruptcy auction block.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
The CPO offered a way for the bankruptcy court to appoint a data privacy specialist who could check the fine print of the company's privacy agreements, cross-reference privacy laws, and then come up with recommendations for how to structure a deal that might reduce any harms to the consumer.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
Laura says one example of the impact a CPO can have on one of these cases is the RadioShack bankruptcy from 2015.
Planet Money
How 23andMe's bankruptcy led to a run on the gene bank
The biggest recommendation that Frejka gave had to do with the amount of data being sold. She argued that instead of selling the data for every RadioShack customer ever, the sales should only apply to customers who had been in contact with the company in the past two years.