The Importance Of A Privacy Policy For Startups

Upon starting a new business, a new entrepreneur tends to focus on immediate business pressures. In many cases, legal compliance is not in the forefront of a new business owner’s mind. However, if a business owner has any kind of marketing strategy, collects personal data from individuals using a website or mobile phone app, or engages online in any way, there is a strong possibility that they will need to include a privacy policy in their website and on their digital platforms. A comprehensive privacy policy can potentially protect the company from legal challenges in the future.  

A privacy policy document describes the company’s data processing practices. The policy is typically made available through the company’s website. It explains how the company collects and uses the information and discloses company guidelines on its use. 

Provided the policy is well drafted, it should protect the company from claims that it misused personal information or misled the user about the company’s collection or use of the data.

Different laws around privacy in other countries can complicate compliance for business owners with a digital presence.

The United States and Privacy

Laws in the United States relating to online privacy are much less strict than in the European Union. Important federal privacy laws apply to specific types of businesses in the United States. 

These include

• The Children’s Online Privacy Protection Act (COPPA)
• The Health Insurance Information Privacy Act (HIPAA)
• The Gramm-Leach-Bliley Act (a law regulating financial institutions)

These privacy laws apply to specific businesses and will not apply to everyone.

Some states have their own privacy laws. For example, California has its own state privacy laws, including 

• The California Online Privacy Protection Act (CalOPPA)
• The California Consumer Privacy Act (CCPA)

Additionally, direct marketing businesses in the United States are regulated by a federal law known as CAN-SPAM.

The European Union (EU) and Privacy Policy

The EU has been very proactive as regards online privacy. The privacy regulation applies to all countries that are part of the EU and the United Kingdom. 

The two primary privacy laws in the EU are

• The General Data Protection Regulation (known as the GDPR)
• The ePrivacy Directive (also called the Cookies Directive)

The standard of compliance in the EU is set much higher than elsewhere. Therefore, if business owners comply with these stricter rules, they will probably comply with them everywhere else. 

A startup business must comply with EU privacy law if it offers goods and services in the territory of the EU. It also applies to the business if it involves monitoring customer behavior in the EU. The fact that the company operates in the United States does not release it from the necessity to comply with EU regulations.

Before creating a privacy policy for a startup business, it is essential to consider the following questions: 

• Who is the company’s target market?
• What methods of marketing does the company intend to use?
• What service is the company providing?
• Which countries will it serve?

It is also important to consider performing a data audit of the business. This should include answering the following questions: 

• What inbound personal data does the company gather digitally? 
• What specific other types of data does the company collect?
• Why does it collect the data? 
• Where is this data stored? 
• Who else receives this data? (i.e. marketing companies, web servers, etc.) 

Answering these questions will help startups and small businesses understand what they need to cover in their privacy policy. Because every startup and business is different, it is important to consider visiting with an experienced business attorney at Amini & Conant to get your specific questions answered.

Privacy policy laws do not make any exceptions based on the business size. All businesses are expected to comply. If your startup has a web presence, it will likely collect data. Companies need to adhere to the law. However, making customers feel at ease with how their data is being treated is essential. Additionally, small businesses sometimes grow exponentially and become big businesses. If the company sets a legally compliant foundation early on, it will be easier to continue to add or modify a privacy policy.

While many people use templates to create a privacy policy, every single business is different. What applies to one business may well not apply to someone else’s. An audit of the information your company collects and its competitor’s audit will most likely differ significantly. Business owners who create their own privacy policies risk the possibility that they will not comprehensively cover themselves regarding their data intake on their websites or other digital platforms or applications. The experienced business attorneys at Amini & Conant work with startup business owners and entrepreneurs of all sizes to craft customized tailor-made privacy policies that will comply with the relevant laws and ensure that a business will have legal protection.

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