EU commissioner Viviane Reding has asked the UK government to clarify
whether the Phorm system is in breach of European data laws.
Phorm tracks users' web habits in order to better target ads at them and three UK ISPs are so far signed up to it.
BT is due to begin a widescale trial of the service imminently.
Revelations that the telco conducted secret trials without
seeking the consent of customers have led opponents of the scheme to
call for it to be prosecuted.
They believe BT's two earlier trials were illegal because users were not informed that their web habits were under surveillance.
But the Information Commission ruled in May that no action would
be taken against the telco due to the difficult nature of explaining to
consumers what it was doing.
It said anyone using Phorm must ask for the consent of users before going ahead with any further trials.
Virgin Media and TalkTalk are also considering whether to use the system.
The letter from Mrs Reding, the details of which are not
publicly known, was sent in mid-July and the UK government has until
the end of August to respond.
According to a spokesman for Reding's information society and
media commission, there is already a "dialogue" with the UK government
although no details of this have been revealed.
"We are working with a number of departments on a response," said a spokeswoman for the Department of Business.
The Foundation for Information Policy Research (Fipr) has been one of the more outspoken critics of Phorm.
Fipr's general counsel Nicholas Bohm believes ISPs implementing the system could find website owners objecting.
"There is going to be increased focus on the rights of website
owners and their right to prevent material being used to the advantage
of their competitors," he said.
He believes pressure from the EU may force the Information Commissioner to re-examine the system when BT rolls it out.
"BT will persuade themselves to do it because they see a lot of
money in it but it is unlikely that it will be compliant," he said.
An e-petition on the Downing Street website calling for Phorm to be dropped has so far attracted over 16,000 signatures.