Your business is considering purchasing a smaller company ("Target Co") to complement its existing business divisions. Although Target Co has little in the form of tangible assets, it has developed particularly strong brand awareness in certain market segments, achieved through a marketing strategy which centred around the effective use of social media. Target Co's revenue stream now relies heavily on the followers, fans, subscribers and other consumers who feel a sense of connection with Target Co's brands through established social media connections.
Naturally, as part of the purchase, your business will acquire all relevant intellectual property rights of Target Co, including its registered and unregistered trade marks. Any domain names can also be easily transferred. However, what about Target Co's social media accounts? Without those, the revenue stream that makes Target Co an attractive proposition might start to dwindle or, worse still, evaporate altogether.
In this article, we examine the difficulties that the current terms of service of several social media providers ("SMPs") create as a result of the restrictions they place on the transfer of accounts. We then consider whether there are any strategies which can be implemented to overcome those difficulties and whether the risks of implementing those strategies are worthwhile.
Major SMPs: Terms of Service
Individual users of Facebook hold accounts which are displayed on Facebook in the form of a profile. Facebook's general terms of service forbid users to use the personal timeline on their profile primarily for their own commercial gain. Facebook expressly states that "pages" are intended to fulfil such commercial purposes.
There are various forms of Facebook page. From a commercial perspective, product pages and brand pages are particularly prevalent. Whereas a Facebook profile is controlled by a "user", Facebook pages are controller by one or more "administrators".
Individual users of Facebook can "like" a business' page, make a "post" which mentions the page or "share" something produced by or relating to the page, which may in turn be displayed in the news feed that is visible to that user's Facebook "friends". Although one might scoff, the Arsenal Football Club's Facebook page, for example, has more than 13,987,000 likes at the time of writing, meaning that the Arsenal brand has been exposed to countless friends of those 13,987,000 users. This is mass marketing: and it is effective.
Yet whether Target Co in the above scenario holds an account (which it uses to promote its business, whether contrary to Facebook's terms of service or not) and / or administers a page or pages, Facebook's terms of service may present problems for your business. Those terms relevantly provide (with emphasis added):
"You will not transfer your account (including any Page or application you administer) to anyone without first getting our written permission."
"You will not share your password (or in the case of developers, your secret key), let anyone else access your account, or do anything else that might jeopardize the security of your account."
"You will not transfer any of your rights or obligations under this Statement to anyone else without our consent."
YouTube is owned by Google. Users of YouTube may hold an account (which may either be a YouTube specific account or a linked Google account) and may create a "Channel" which is associated with that account. In commercial terms, it is the YouTube Channel, to which individual users can "subscribe", that has most value. For example, at the time of writing, Nike's YouTube Channel has over 78,000 subscribers to whom Nike can market directly. (As it happens, the YouTube Channel of boyband "One Direction" has more than 1,500,000 subscribers.)
However, like Facebook, if it becomes necessary to transfer a YouTube account (and any Channel and subscribers that go with it), YouTube's general terms of service present difficulties. Those terms relevantly provide (with emphasis added):
- "These Terms of Service, and any rights and licenses granted hereunder, may not be transferred or assigned by you, but may be assigned by YouTube without restriction".
- "In order to access some features of the Service, you will have to create a YouTube or Google account. You may never use another's account without permission. When creating your account, you must provide accurate and complete information. You are solely responsible for the activity that occurs on your account, and you must keep your account password secure".
- "You agree not to use the Service for any of the following commercial uses unless you obtain YouTube's prior written approval:
- the sale of access to the Service".
Users of Twitter have an "account" (eg. "@TargetCo") from which they "tweet" messages. Those tweets can be seen by those who "follow" the user's account, who can reply to the tweet or "re-tweet" it. The extent to which a business is making effective use of Twitter can be measured by the business' "engagement rate", which is assessed by reference to the number of times that the business' tweets are replied to and/or re-tweeted by other users.
Self-evidently, Twitter can be an extremely effective marketing tool. For example, Porsche used Twitter with great success for the 2012 launch of its new 911 model. In doing so, Porsche achieved:
- an 87% engagement rate;
- a 594% increase in daily followers; and
- a 300% increase in positive brand sentiment.
The "@Porsche" Twitter account currently has more than 143,000 followers - an extremely valuable resource for the purposes of future marketing activities. However, again, Twitter's terms of service mean that it could be difficult for another business, upon purchasing Porsche's assets, to gain the benefit of those followers. Those terms relevantly provide (with emphasis added):
- "Your License To Use the Services Twitter gives you a personal, worldwide, royalty-free, non-assignable and non-exclusive license to use the software that is provided to you by Twitter as part of the Services. This license is for the sole purpose of enabling you to use and enjoy the benefit of the Services as provided by Twitter, in the manner permitted by these Terms."
- "You are responsible for safeguarding the password that you use to access the Services and for any activities or actions under your password."
Strategies where transfer prohibited or not granted
As illustrated above, the terms of service of most major SMPs forbid the unauthorised transfer of accounts. Some, such as Facebook, expressly allow transfers if written consent is obtained. However, in such circumstances, anecdotal evidence and experience suggests that there is generally no formalised procedure  to obtain SMPs' consent to a transfer, no requirement for a SMP to act reasonably in relation to any such request, and little (or, in many cases, no) prospect that the SMP will provide any response to the request at all.
Accordingly, in order to transfer ownership or (at the very least) control of Target Co's social media accounts, it will be necessary to consider implementing alternative strategies. Unfortunately, each of those strategies carries certain risks. First, there are legal risks, given that the implementation of certain strategies may breach the relevant SMP's terms of service. Second, there are practical risks, given that the relevant strategies may rely upon the cooperation of persons with whom your business no longer has a contractual or economic relationship.
Option 1 – purchase the shares in Target Co, rather than its assets
Many of the difficulties identified above may be avoided if a share purchase, rather than an asset purchase, is chosen as the transaction method for the purpose of gaining control of Target Co's assets. However, this method will often be unattractive where (for example) Target Co is heavily geared, has a restrictive or complicated share structure, has assets that your business has no interest in acquiring or would give rise to adverse tax consequences. Accordingly, where an asset purchase is necessary, other methods of obtaining control of Target Co's social media accounts will need to be pursued.
Option 2 – Require Target Co to provide permanent and exclusive access to all social media accounts
This would be effected by requiring Target Co, as part of the purchase, to provide the current password to its social media accounts and then agreeing not to access those accounts in future. Your business could then change the password, once it obtains access, thereby preventing Target Co from accessing the accounts in future.
However, although this would (at least initially) be practically effective, it is likely to breach the terms of service of the relevant SMPs by Target Co and / or your business: in each case constituting both an unauthorised password disclosure and an assignment to a third party without the SMP's consent. There is therefore a risk that the relevant SMP may shut down the account at some time in the future (particularly if your business' relationship with Target Co sours, following which Target Co notifies the SMP of the unauthorised transfer).
Whilst your business (as the owner of Target Co's trade marks) could then seek to invoke the trade mark policy of the relevant SMP in order to have any account bearing Target Co's trade marks transferred to it, this would obviously rely upon the SMP then agreeing to transfer the account under their trade mark resolution policy (which would not be guaranteed).
Option 3 – Appoint Target Co as agent to operate the social media accounts in perpetuity
Unlike option 2, this would not be likely to infringe the SMPs' terms of service because it would not involve an unauthorised transfer, assignment of ownership or password disclosure. However, like option 1, option 2 relies on business maintaining a positive relationship with Target Co. If the relationship sours, the accounts will be at risk.
Option 4 – Require Target Co to deactivate its social media accounts and agree not to open any new account under certain names, then establish new accounts with the same names
This would not be likely to breach the SMPs' terms of service and would not (after the old accounts are deactivated) require the cooperation of Target Co. However, there are two problems with this method.
First, not all SMPs immediately make the name of deactivated accounts available for other users following deactivation (eg. YouTube). There will therefore be an unavoidable time lag or, worse, the risk that cyber-squatters will pick up the name before your business is able to do so.
Second, and more importantly, what made Target Co's social media accounts attractive in the first place must be borne in mind, given that this method is somewhat of a poison pill. That is because it is not generally possible to transfer the followers, fans, subscribers and the like of the deactivated accounts to the new accounts. The slate will be wiped clean.
Businesses need to be aware that when it comes to social media "assets", the SMPs hold almost all of the cards, and any attempt to purchase those "assets" by way of a simple asset purchase agreement will often be ineffective. While there are ways to (at least temporarily) transfer control of social media accounts between entities, the legal and practical problems which arise cannot be ignored. Accordingly, great care needs to be taken when structuring transactions which include the transfer of ownership or control of social media accounts.
This article was first published in the July 2013 edition of the Internet Law Bulletin (2013) 16(3) INTLB 58
 See https://business.twitter.com/success-stories/porsche. Back to article
 Save for Facebook's "merge pages" process. Back to article
 As would transferring control of a Facebook "page" to another user Back to article