Buyer Beware: Personally Identifiable Information May Not Be Transferable in an Asset Transaction

Posted on September 27, 2017 by Brad Wood

While it may be common practice for a company to include in its privacy policy a promise not to sell personally identifiable information (“PII”) collected from customers and others, such a promise could have unanticipated consequences in the context of a sale of the company.  The Federal Trade Commission construes privacy policies as being a promise that is required to be complied with even if more restrictive than applicable law.  As a result, a company that has made a promise not to sell PII in its privacy policy will likely not be able to include that PII in the sale of all or substantially all of the assets of the company.  While the transaction could be restructured as a merger or equity sale to avoid the privacy policy restriction on the sale of PII, a merger or equity sale may not always be a viable option for the buyer and seller.  Therefore, in light of how important the use of PII has become to modern-day businesses, it is critical that potential buyers of businesses identify any restrictions on the sale of PII included in a seller’s privacy policy as early as possible in the transaction process.

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