The European Commission threatened Britain
with sanctions on Tuesday for allowing an Internet service provider to
use a new advertising technology to track the Web movements of
The European telecommunications commissioner, Viviane Reding, said
that use of a tracking tool created by Phorm violated European privacy
laws. The country’s largest service provider, BT, acknowledged last
April that it used the tool without customers’ consent in 2006 and
2007, Ms. Reding said.
“European privacy rules are crystal clear: a person’s information can only be used with their prior consent,” Ms. Reding said.
The case could become a test for the limits of ads that aim at
online behavior. Supporters of the practice say it has the potential to
transform advertising by allowing marketers to show Internet users only
ads that are considered relevant to them, based on their surfing
But the technique has come under scrutiny because of concern that
personal privacy could be violated as companies seek more specific data
on individual users. In the United States, lawmakers in both houses
held hearings last fall on targeted advertising. Although no
legislation came out of the deliberations, one broadband operator,
Charter Communications of St. Louis, dropped plans to conduct a test of
behavioral advertising technology after receiving protests.
The British government has resisted calls for tighter oversight and
has supported voluntary efforts by industry to monitor how user data is
collected. This month, the Internet Advertising Bureau, a trade
association for Internet marketers in Britain, asked its members to
sign a voluntary code of conduct stating that no Web data would be
collected without a user’s explicit consent.
The initiative was endorsed by Ed Richards, the head of the British telecommunications regulator, OfCom.
After investigating complaints about BT’s use of Phorm, the British
information commissioner, Richard Thomas, concluded that Phorm’s
technology, which relies on anonymous cookies and tracking of
individual Web movements, had adequately eliminated ties to individual
users. BT held another trial of Phorm’s technology from October through
December using volunteers.
Many companies involved in Internet advertising, including Google
and other social networking services, use behavioral targeting. But
because Phorm receives actual Web-use records from service providers,
it says its technology is more accurate.
An Internet association that has led the protest against Phorm in
Britain, Open Rights Group in London, said the government had ignored
European law to accommodate businesses interested in developing
lucrative Internet advertising models.
“What the U.K. government has done is lackeyed up to business and as
a result we’ve been breaking E.U. law and now have this infraction
proceeding as a result,” the executive director of the Open Rights
Group, Jim Killock, said.
Ms. Reding threatened to take Britain to court if the government did
not step in and enforce European law. A spokeswoman for the Department
for Business, who did not want to be identified, confirmed that the
government had received the notice from Brussels and would respond
after analyzing the issue.
Ms. Reding also called for stronger action by social networking services to protect the privacy of minors.
Under the action announced Tuesday, the commission is threatening to
begin an “infringement proceeding” against Britain, accusing it of
failing to observe European privacy law.
A spokesman for Phorm, Justin Griffiths, said the company felt it
was being made an example in a broader regulatory struggle between
Britain and the commission.
“Phorm is very confident that it is compliant with the relevant U.K. laws and E.U. directives,” Mr. Griffiths said.
Simon Davies, the director of Privacy International in London, said
the case against Britain over Phorm was a broader test of the unclear
legal landscape regarding a technique that allows companies to track
the identity and Web habits of individual computers, traced by their
unique Internet Protocol addresses. “The E.U. has been attempting to require the U.K. government to
produce a definitive statement on behavioral advertising for more than
a year,” Mr. Davies said. “But the U.K. government has refused to do
that and now we have a total breakdown of regulatory oversight and the
result is intransigence on the part of Britain."
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