Startup Alert: California AG’s Enforcement Action Impacts Online Businesses

At Founders Workbench, we try to provide regular updates of court decisions and other legal developments that may impact startup founders. Because so many startups are in Silicon Valley, and because California often plays a “first-to-lead” role in many areas of technology and law, the Flash takes note when the Golden State brokers an enforcement action against an Internet-based business. If your company does business online, you’ll want to know about this development.

On Oct. 2, the Office of California Attorney General Kamala Harris reached a settlement with home design and renovation company Houzz, Inc. over allegations that Houzz had recorded customer and employee conversations without providing proper notice.

This is a big deal for online businesses. In addition forcing Houzz to pay $175,000 in fines and penalties, the settlement also requires the company to conduct a privacy risk assessment and, most notably, hire a chief privacy officer within 60 days. This is the first time that the California AG has expressly required the hiring of a privacy officer as part of a negotiated settlement.

Given the AG’s clearly expressed view that hiring a privacy officer is a standard measure of good privacy practices, this settlement will have potentially far-reaching impact on Silicon Valley tech companies and startups. Indeed, the California AG claims jurisdiction to enforce state laws against all companies conducting business in California – essentially any company with a website.

Goodwin Procter privacy and data security partner Beau D. Barnes have written an insightful Client Alert that we wanted to flag for FWB readers because it examines an important issue that startups and other companies may encounter in the near future.

Read the entire Client Alert here.

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