How Your Privacy Policy Could Prevent The Sale of Your Website

It pains me how little thought and effort most website operators put into the legal documents for their websites. Much like changing the oil in your car regularly can prevent expensive repairs, a quality set of legal documents can prevent legal claims against your online business. Inprivacy policy prevent sale of website this article, we take a look at how a poorly thought out privacy policy can prevent you from selling your site to a third party.

Selling Your Site

Ask yourself a simple question. What is the exit strategy for your online business? Are you going to take the business public, try to sell it or just run it until you’ve made so much money you can’t see straight? The answer for most website operators is…they haven’t given it much thought.

Practically speaking, most website operators face one of three exit strategies. The first is the site never takes off and is abandoned. The second is the site makes enough money that you just run it in perpetuity. The third is you sell the site. It is this last scenario where you can run into real problems with your site documents if you are not careful.

User Email Addresses

Did you have an internet attorney write up your website documents when you started your site? If not, your privacy policy is most likely going to kill any sale of the website to a third party. Why? Open another window and pull up your site. Now click onto the privacy policy and start looking for the clause regarding the sale of user email information. Most will read something like:

“We respect your privacy. We will never sell, rent or disclose your email address to another party.”

This statement is a quaint notion. It can also be a death blow if you try to sell your website. Why? The party buying your site undoubtedly wants all of the assets associated with it. These assets include the user email addresses that you’ve promised not to sell!

Oh, No

Your privacy policy acts as a contract with your users. You must abide by the language in the policy. How do you think the purchasing party is going to react when they realize you cannot sell the email addresses and personal information of users of the site? Let’s look at a real life example.

Real Life Example

Plenty of Fish is an online dating website. The company recently sought to purchase the dating site known as True.com, which was available thanks to the bankruptcy of its parent company True Beginnings. Plenty of Fish agreed to pay $700,000 into the bankruptcy estate for all the assets associated with True.com.

The office of the Texas Attorney General took note of the sale and filed an objection with the bankruptcy court. The privacy policy for True.com contained a familiar looking bit of language:

“True does not sell, trade, or otherwise disclose customer list names, addresses, birth dates, email addresses or other individually identifiable information to unaffiliated third parties without your permission.”

[Read the Objection.]

Your privacy policy most likely contains something similar.

How did Plenty of Fish react to the objection? In theory, they could have asked True.com to send out an email to all members asking permission to transfer the user data to Plenty of Fish. How many members do you think would have agreed to such a transfer? Plenty of Fish thought the percentages would be so small that it canceled the deal.

$700,000 Circles The Drain

Imagine if a third party offered you $700,000 for your site, and terms in your privacy policy scuttled the transaction. We might have to coin a new term known as “privacy policy rage.” The startling thing, however, is perhaps 95 percent of the websites on the web suffer from this privacy policy defect. Does your website?

Privacy law is evolving at a rapid rate, and it is vital website operators stay on top of the changes. Contact me today for a free consultation to find out if your privacy policy is up to snuff or not. After all, you don’t want to lose out on a potential lucrative sale of your website.

Richard A. Chapo, Esq.

The content on this website is intended to be educational and is not specific legal advice for your situation. The information is not updated. This site and blog constitutes a communication, solicitation and advertisement pursuant to relevant rules of professional conduct and professional codes in California.