Due Diligence In Acquiring Social Media Accounts

Due diligence is a critical part of any acquisition. A company looking to buy an asset (any property a business owns) will typically conduct due diligence prior to acquiring the asset in order to determine whether the asset it wishes to buy has been characterized correctly by the Seller. This process consists of a thorough review of all aspects related to the target asset. While it may seem like a tedious task to complete, due diligence is an important part of the acquisition process because it essentially provides the buyer with a complete evaluation of information relating to the asset so as to protect against any misrepresentations made by the Seller.  By engaging in sufficient due diligence, companies can further protect themselves from entering into bad deals.
 
Due diligence can be completed on the acquisition of any asset, including social media accounts. ​​Unfortunately, it can be difficult to determine the ownership rights of digital assets if a company has not instituted the proper protections for this property. Before acquiring these types of digital assets, purchasers should consider a number points in order to make sure they are not getting swindled.
 
Here are several aspects to consider when evaluating whether to acquire a target’s social media accounts:

• Who created these account(s)?
  • An individual?
  • An independent contractor?
  • An employee of a company?
• Is there a contract with the account creator?
  • Does that contract properly convey all rights to the account(s), AND its contents?
  • Was the contract an employment agreement, and was the account created as part of the employee’s scope of work?
• If the account creator was an employee of a business, does the company’s employee handbook contain any social media policies?
• Do said policies convey ownership of account(s) created in furtherance of the company and the content on said account(s)?
• Who currently has access to the account(s)? Are any of the individuals a master user?
• Have the relevant statistics of the account(s) been artificially inflated?
  • Did the account holder buy fake followers?
  • Did the account holder create fake accounts to inflate its following total?
  • Have the account(s)’ interactions been fabricated to inflate its reach?
• Has the content posted on the account(s) violated any of the site’s rules?
  • Did the account holder have the rights to post all content pieces (i.e. clips, videos, music, etc.)?
  • Is any of the content unlawful, illegal, or does it promote violence?
  • Has the account holder received any notifications, warnings, or suspensions from the social media platform for violating its Terms of Use and/or rules?
  • Has the account holder received any notices or letters regarding any alleged infringement?
• Has the account and/or its content ever been subject to, or in any way related to, any executed contracts?
  • Has the account posted any sponsored posts?
    • Does the account holder own the rights to those posts and/or the content contained in the post?
    • Were thes e posts compliant with the FTC guidelines for sponsored advertising posts?
    • Were the posts compliant with site rules regarding sponsored posts?
• Assess whether there are any transfer restrictions relating to the account.
  • Does the account holder have the full authority to transfer the account?
  • Are there any third party agreements limiting transfer?
  • Does the social media platform allow for the transfer of the account to another party?

 
Generally, if you believe there are no issues with the target asset after completing this checklist, it is likely that the seller made accurate representations regarding the asset, and you may be more comfortable in proceeding with the deal. However, if any red flags appear along the way, you may want to take a more cautious approach and ask follow-up questions in order to understand the situation. Nonetheless, businesses should keep in mind that each acquisition is different and there are a number of additional factors that should be considered when entering into this type of agreement. If you need any assistance in performing due diligence and completing your acquisition, please feel free to contact us.