Third-Party Data Sharing: What Your Privacy Policy Must Disclose
Almost every online business shares user data with third parties. Whether it is a payment processor handling transactions, an analytics platform tracking usage, or an advertising network delivering targeted ads, data flows between your business and external partners constantly. Privacy laws require you to disclose these data sharing practices clearly and completely in your privacy policy.
Why Third-Party Sharing Disclosures Matter
Third-party data sharing disclosures are among the most scrutinized sections of any privacy policy. Regulators focus on them because:
- Users cannot make informed choices without knowing who receives their data
- Third-party sharing multiplies the risk of data breaches and misuse
- Advertising-related sharing is often the most invasive and least expected by users
- Undisclosed sharing violates the transparency principles of virtually every privacy law
Types of Third-Party Data Sharing
Service Providers
Service providers are companies that process data on your behalf to help you operate your business. They act under your instructions and are contractually bound to use data only for the purposes you specify.
Common service providers include:
- Payment processors — Stripe, PayPal, Square
- Cloud hosting — AWS, Google Cloud, Azure
- Email services — SendGrid, Mailchimp, Postmark
- Customer support — Zendesk, Intercom, Freshdesk
- Analytics — Google Analytics, Mixpanel, Amplitude
Advertising and Marketing Partners
Advertising partners receive data to deliver targeted ads, measure ad performance, and build audience segments. This category includes:
- Ad networks — Google Ads, Facebook Ads, programmatic ad exchanges
- Retargeting providers — Criteo, AdRoll
- Attribution platforms — AppsFlyer, Adjust
- Data management platforms — Oracle Data Cloud, Lotame
Business Partners
Data may be shared with business partners for joint marketing, co-branded services, or strategic partnerships.
Affiliates and Subsidiaries
If your company has parent companies, subsidiaries, or affiliates, data may flow between related entities.
Legal and Regulatory Authorities
Data may be disclosed to government agencies, law enforcement, or regulators when required by law or in response to legal process.
Acquirers
In the event of a merger, acquisition, or sale of assets, user data may be transferred to the acquiring entity.
Under the CCPA, sharing data with advertising partners for cross-context behavioral advertising constitutes "sharing" that triggers the requirement to provide a "Do Not Sell or Share My Personal Information" opt-out. This applies even if no money changes hands — making data available to ad networks through tracking pixels qualifies.
What to Include in Third-Party Sharing Disclosures
Categories of Recipients
List the categories of third parties that receive user data. Be specific enough to be meaningful:
- Instead of: "We share data with partners"
- Use: "We share data with payment processors, email service providers, cloud hosting providers, and advertising networks"
Categories of Data Shared
For each category of recipient, specify what types of data are shared:
- Payment processors receive name, email, billing address, and payment card information
- Analytics providers receive IP address, device information, and usage data
- Advertising networks receive device identifiers, browsing activity, and demographic information
Purpose of Sharing
Explain why data is shared with each category of recipient:
- Payment processors: to process transactions and prevent fraud
- Analytics providers: to understand usage patterns and improve the product
- Advertising networks: to deliver relevant ads and measure ad performance
Legal Basis for Sharing (GDPR)
Under the GDPR, you must identify the legal basis for each sharing activity:
- Consent (for advertising-related sharing)
- Contract performance (for service providers essential to service delivery)
- Legitimate interests (for analytics and product improvement)
Safeguards
Describe the protections in place for shared data:
- Data processing agreements with service providers
- Standard Contractual Clauses for international transfers
- Contractual restrictions on how recipients can use the data
- Technical measures like encryption and access controls
Disclosure Requirements by Law
GDPR Requirements
The GDPR requires you to disclose:
- The categories of recipients of personal data
- Whether data is transferred outside the EU/EEA and the safeguards in place
- The legal basis for sharing
- Data subject rights regarding shared data
CCPA Requirements
The CCPA requires:
- Categories of personal information disclosed for a business purpose
- Categories of third parties to whom data is disclosed
- Categories of personal information sold or shared
- A "Do Not Sell or Share" opt-out mechanism if applicable
- Information about data sharing in the preceding 12 months
State Privacy Laws
Virginia, Colorado, Connecticut, and other states with privacy laws have similar disclosure requirements, generally including categories of data shared, categories of recipients, and the purposes for sharing.
Maintain a third-party data sharing register that documents every vendor, partner, and tool that receives user data. Include the data categories shared, the purpose, the legal basis, and the contract date. This register makes privacy policy updates straightforward and serves as compliance documentation during audits.
Managing Third-Party Data Sharing Risks
Vendor Due Diligence
Before sharing data with any third party:
- Review their privacy and security practices
- Assess their compliance with applicable privacy laws
- Evaluate their data breach history and response capabilities
- Verify they have appropriate certifications (SOC 2, ISO 27001)
Data Processing Agreements
Execute data processing agreements (DPAs) with all service providers. These agreements should:
- Define the scope and purpose of data processing
- Require the processor to act only on your instructions
- Mandate appropriate security measures
- Require notification of data breaches
- Address sub-processor management
- Establish data return and deletion procedures
Data Minimization
Share only the minimum data necessary for each purpose:
- Does your email provider really need the user's location?
- Does your analytics tool need to receive user names?
- Can you anonymize or aggregate data before sharing?
Regular Audits
Review your third-party data sharing practices regularly:
- Confirm that all active sharing relationships are disclosed in your privacy policy
- Verify that discontinued tools have been removed and data has been deleted
- Ensure data processing agreements are current and cover all sharing activities
- Test that opt-out mechanisms work correctly
Common Mistakes in Third-Party Sharing Disclosures
Forgetting Embedded Third-Party Tools
Every script, pixel, widget, and embed on your website shares data with a third party. Social media buttons, YouTube embeds, Google Maps, and live chat widgets all transmit user data to their providers.
Using Generic Language
"We may share your data with partners" tells users nothing meaningful. Name the categories of partners and what data they receive.
Not Updating After Vendor Changes
When you switch analytics providers, add a new advertising platform, or integrate a new tool, your privacy policy must be updated to reflect the new data sharing relationship.
Treating All Sharing the Same
There is a meaningful legal distinction between sharing data with a service provider (who processes it under your instructions) and sharing data with an advertising partner (who uses it for their own purposes). Your privacy policy should reflect these different relationships.
Transparent, accurate third-party data sharing disclosures build user trust and demonstrate your commitment to responsible data handling. They are also one of the first things regulators examine during compliance reviews, making them essential for avoiding enforcement action.