Legal Pitfalls when Buying an Online Shop

While various SaaS solutions or online marketplaces have made setting up an online shop easier than ever, buying an existing online shop can also be a worthwhile way to get started. The buyer benefits from an existing customer base, takes over the good reputation of the shopwith the reviews and, in the best case, can rely on a good search engine ranking.

Basics of buying an online shop

A distinction is made between a share deal and an asset deal:

• As with any company purchase, the shares in a shop can be acquired in full or in part (so-called share deal). Since a sole proprietorship has no shares, share deals are only possible for partnerships (GbR, OHG, KG) and corporations (GmbH, AG).
• On the other hand, the buyer can also acquirethe individual assets of the company, such as rights or inventories (so-called asset deal) in part or in full.

The acquisition through a share deal is often easier to realise for online shops, as the company is taken over as an entity and the company remains unchanged. A decisive advantage is that contracts that are essential for the continued operation of the company (supplier contracts, software rental agreements) remain in place. However, it is important to check whether the contractual partner has reserved the right to terminate the contract extraordinarily in the event of a change of ownership (so-called change of control clause). It is often possible to waive the right of cancellation prior to the transaction.

In the case of an asset deal, on the other hand, the assumption of the contracts must be agreed individually with the contractual partners , which is often in the interests of both the buyer and the seller , as the latter would otherwise have to continue the contract for its own account. Whether all contractual partners will play along is another question, however, which makes the asset deal more complex.

Special features of buying a shop from an online marketplace

Sometimes shop operators do not have their own platform for selling their products, but rely on marketplaces such as Amazon, eBay or Zalando. As a result, the shop operators benefit from the high reputation that the platforms enjoy among customers . The storage and dispatch of goods can also be handled by the marketplace operator.

However, the marketplace operators regularlyrestrict the possibility of transferringexisting shops in their marketplace T&Cs (e.g. eBay and Amazon). In the case of Amazon in particular, Amazon’s consent and the conclusion of a separate transfer agreement are required.

Legal due diligence

As part of legal due diligence, we thoroughly assess the legal risks associated with the acquisition of a shop :

• Many shops are at risk of warnings because they have not implemented consumer protection or competition law requirements or have done so inadequately.
• By purchasing the shop, the purchaser is also liable for incorrect information. There is a risk of warnings.
• It is also important to find out whether declarations to cease and desist have been issued in the past. There is a risk of expensive contractual penalties if – unknowingly – a corresponding declaration is breached.
• Data protection violations can result in draconian fines.
• The legal situation is dynamic and the details are sometimes only determined by court judgements.
• Ineffective general terms and conditions also mean that the “default settings” of the German Civil Code, which are usually less favourable for entrepreneurs, take the place of the invalid clause , which canlead tounwanted liability risks, particularly in the area of warranty.

As part of a detailed website check, we ensure that the shop is in line with the current legal situation and make concrete suggestions for practical and legally compliant solutions.

If disputes – judicial or (still) extrajudicial – already exist between the shop operator and third parties, we recommend an assessment of the
Prospects of success of the legal defence and the associated cost risks for the buyer.

Data protection issues

From a data protection perspective, in addition to the compliance issues raised by the previous operator, there is also the question of the permissibility of transferring the customer base. The
Customer base is decisive for the value of the company. The distinction between asset and share deals is also relevant here:

• As the entrepreneur remains ina share deal , the acquirer can processthe data in the same way as was permitted under data protection law by the previous operator. In this respect, the extent to which the existing data was lawfully collected and processed must always be analysed as part of the due diligence process . It is particularly important to look at declarations of consent and check whether they are effective.
• If, on the other hand, it is an asset deal in which the customer data is transferred as such , the implementation is more complicated. If – as is usually the case – no express consent is to be obtained from the data subjects, the data can be transferred to the acquirer if the customers are informed in advance and granted a right to object. This does not apply to special categories of personal data within the meaning of Art. 9 para. 1 GDPR , such as health data. This becomes relevant, for example, when purchasing from an online pharmacy.