Increasing numbers of sports clubs and bodies are using the expertise of third party specialists, be it for websites, apps, social networks or gaming platforms to interact with their fans domestically and internationally. However, there appears to be a disconnect in terms of understanding the legal requirements and obligations the clubs are under when outsourcing (by way of a licence) or selling a database to a third party. While data protection is not the most exciting topic to many it is particularly important with the Information Commissioner Officer ("ICO") having the power to levy significant fines of up to £500,000 for breaches of the Data Protection Act 1998 ("Act").
When outsourcing or selling a database there are a number of considerations that a club may need to consider such as obligations under existing agreements, intellectual property rights, valuation questions and data protection. This article will briefly set out the current rules and regulations in relation to data protection. A case study concerning a hypothetical football club called St. Cuthbert's FC will be used and the article will suggest a few considerations that are likely to be included in such an agreement. There are no additional or separate rules for data protection for sports clubs as for other industries but recent conferences and articles highlight an apparent gap between the law and the actions being undertaken by clubs.
Current data protection laws
The current domestic law is the Act which came into force on 24 October 2001 and implemented the requirements of the EC Data Protection Directive (95/46/EEC). The Act applies where there is processing of personal data by a data controller who is either established:
- in the United Kingdom (or another European Economic Area state) and processing the data in the United Kingdom; or
- outside the United Kingdom (or another European Economic Area state) but uses equipment in the United Kingdom for processing the data.
Personal data is data that relates to a living individual who can be identified from that data or through that data in conjunction with other data and information which is (or is likely to come) in the possession of the data controller. In practical terms the two areas of data that would be of most relevance to St. Cuthbert's FC are personal names and email addresses.
The Act is directed towards the "data controller" which will be the St. Cuthbert's FC in a scenario where they outsource the marketing function to a third party. The third party would be the "data processor" as they are a person, who is not an employee of St. Cuthbert's FC, who processes the personal data on behalf of the club. Where St. Cuthbert's FC chooses to sell the database to a third party they will cease to be the data controller and this role will pass to the third party. There are however requirements that need to be undertaken by St. Cuthbert's FC when they sell the database, which if not complied with can lead to a fine.
Data protection principles
Where the database contains personal data St. Cuthbert's FC (or the third party where they take over as the data controller) must comply with the eight data protection principles which are set out in Schedule 1 of the Act, which can be found in full here. Below is a brief introduction to the six principles which are the most relevant provisions to St. Cuthbert's FC in this situation.
First data protection principle – fair and lawful processing. Where St. Cuthbert's FC transfers personal data contained within the database (this applies both to an outsourcing or sale) one of the schedule 2 conditions must be satisfied, such as the consent of the data subject (fan) to the transfer. The most common and advisable method for St. Cuthbert's FC to obtain this consent is by way of incorporating consent wording in an agreement (e.g. terms and conditions used when signing up to use the website) which are accepted by the fan prior to the collection of the data.
Second principle - personal data can only be obtained for specific lawful purposes and any processing of the data outside of these purposes is prohibited. The fan (as data subject) must be made aware as to the purposes for which their data is being collected. St. Cuthbert's FC would need to state that the intended purposes of the data being collected include providing the data to third parties for the purposes of marketing for example. It is strongly advisable that St. Cuthbert's FC would future proof the accepted purposes for which they can use the data, as the purposes do not all need to be undertaken as soon as the data is collected.
Fourth principle - personal data must be accurate and up to date. Therefore St. Cuthbert's FC may be required by the third party purchaser of the database to give an indemnity that protects the third party in the event that St. Cuthbert's FC have failed to ensure the database is up to date or inaccurate such as removing a fan's details upon request.
Fifth principle - personal data must not be retained for longer than necessary for the purposes for which it was originally processed. St. Cuthbert's FC are required to remove data which is no longer necessary for example where the information was only collected in anticipation of a one-off event e.g. player's testimonial once this event has occurred St. Cuthbert's FC cannot use the fans data for non-authorised purposes. St. Cuthbert's FC would be well advised to obtain permission to retain the data for the purposes of marketing when collecting the data e.g. in addition to the processing of the user's purchase of testimonial tickets. This would avoid St. Cuthbert's FC having uncertainty as to whether use of the data would be compatible with the purpose for which it was collected in the event they wished to use it for marketing purposes. As with the fourth principle a third party buyer will seek protection to cover this legacy data from St. Cuthbert's FC.
Seventh principle - appropriate technical and organisational measures need to be taken to prevent any unauthorised or unlawful processing of, accidental loss or destruction of or damage to personal data. Therefore it is necessary to apply (proportional) encryption over and have adequate back-ups of the data. In the case of St. Cuthbert's FC it would be necessary to ensure that the personnel who have access to (and ability to add to, alter or delete the data) and security over the data is clear. The security should be both physical and technical and be backed up with robust policies and procedures in the event of a breach.
Eighth principle - personal data must not be transferred outside the EEA unless the recipient country has an adequate level of protection for data subjects, unless it falls under one of the limited exceptions e.g. the data subject has consented to such a transfer. Therefore it is important that St. Cuthbert's FC ensures that the data is kept either within the UK or the EEA when it is collected by themselves and when it is transferred to a third party. Where the servers for the third party are located outside of the EEA there may be additional complications and requirements that need to be addressed.
Use of a third party
Where St. Cuthbert's FC does not have the knowledge, capability or intention to conduct the marketing activities in house they may seek to use an independent third party to handle these activities on their behalf. Particularly in the digital age clubs are more commonly seeking to hand over these activities to industry experts. There are two common arrangements for this, namely the sale of the database or the outsourcing of the database to the third party.
a. Sale of a database
If St. Cuthbert's FC wishes to sell their database to a third party they must make it clear to the third party for what purposes the information was collected. As the third party is only entitled to use the information for the purposes that it was collected unless the information was originally collected (at least in part) for the purposes of marketing the third party would need to seek the consent of the fans prior to using it for marketing. This is clearly a potentially onerous, time consuming and expensive exercise for the third party to undertake. Prior to the sale of the database St. Cuthbert's FC should undertake a review as to whether they require the database for other services such as ticketing as it would be somewhat unfortunate they could no longer contact their own fans with offers on membership and tickets.
Where St. Cuthbert's FC decide that a sale is the best course of action they are likely to be required to give warranties to the buyer which may include that the:
- Act has been complied with in all respects in relation to the database at all times;
- St. Cuthbert's FC is entitled to transfer the database to the third party (purchaser);
- Third party is entitled to use the database under the Act for the purposes for which it intends to use it;
- St. Cuthbert's FC has no notice of any complaints or claims under the Act; and
- St. Cuthbert's FC has had no notice that the ICO considers that St. Cuthbert's FC has infringed any provision of the Act in relation to the database.
b. Outsourcing of a database
An alternative option open to St. Cuthbert's FC other than the sale of the database, which would retain ownership of the database, is to outsource the database to a third party. This would enable St. Cuthbert's FC to instruct the third party to undertake tasks such as marketing, ticketing and administration on St. Cuthbert's FC behalf. Where St. Cuthbert's FC chooses to outsource rather than sell the database there are obligations, from a data protection perspective, on both St. Cuthbert's FC (which remains the data controller) and the third party (which will be a data processor).
Therefore in the outsourcing contract it is necessary to establish that:
- St. Cuthbert's FC is permitted under the software licence to outsource the database to the third party;
- There is a written contract between St. Cuthbert's FC and the third party;
- The third party adheres to the Act in particular the seventh data protection principle (encrypting the data);
- All intellectual property rights remain with St. Cuthbert's FC;
- Establishes service levels;
- The third party only processes the personal data in accordance with the express instructions of St. Cuthbert's FC;
- St. Cuthbert's FC is entitled to transfer the personal data to the third party under the Act.
Data protection is an area that is taken extremely seriously in the United Kingdom and failure to notify the ICO and the fans (data subjects) that there has been a transfer of the data can lead to sanctions e.g. a fine. Data controllers cannot process personal information without a full notification to the ICO, which must be kept fully up to date. Therefore the third party, where they are purchasing the database, must also ensure that their notification is up to date to enable them to use the data for the purposes that they anticipate using it for. In this circumstance the directors, managers or officers of a company can be personally liable where the company commits an offence with their consent or participation or can be attributed to their neglect.
What may initially seem a simple idea of getting a third party to perform direct marketing on behalf of a sports club can turn into a problem with serious consequences. Sports clubs would be would be well advised to ensure that they are fully aware of their obligations and to enter into a formal outsourcing or database sale agreement to ensure both parties are aware of their obligations and rights.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.