European Commission Takes Legal Action over Phorm Trials

The European Commission is taking legal action against the U.K. government regarding trials of behavioral targeting technology from Phorm, carried out by British ISP British Telecom, in 2006 and 2007. BT admitted it conducted trials of the controversial ad platform without the consent of its customers, about which the EU has received a number of questions and complaints from European citizens, the Commission says.

“Technologies like Internet behavioral advertising can be useful for businesses and consumers but they must be used in a way that complies with E.U. rules. These rules are there to protect the privacy of citizens and must be rigorously enforced by all Member States,” E.U. Telecoms Commissioner Viviane Reding said in a statement.

“We have been following the Phorm case for some time and have concluded that there are problems in the way the U.K. has implemented parts of the EU rules on the confidentiality of communications,” Reding stated. “I call on the U.K. authorities to change their national laws and ensure that national authorities are duly empowered and have proper sanctions at their disposal to enforce E.U. legislation on the confidentiality of communication,” she continued.

The Commissioner herself has repeatedly invited U.K. authorities to explain how it has implemented relevant E.U. laws in the context of the Phorm case, and now says the Commission has identified problems in the way E.U. rules have been implemented, focusing on the fact that BT users were not consulted, or even informed about the trials.

British regulatory body, the Department for Business, Enterprise and Regulatory Reform, deemed in September 2008 that Phorm’s technology could only be implemented legally under U.K. law if users are presented with an unavoidable statement about the product, and asked to exercise a choice about whether to be involved.

Subsequent trials, with user consent, were conducted by BT late last year.

In response to the Commission’s proceedings, Phorm itself issued a statement intended to “clarify any misunderstandings” surrounding the situation.

“Phorm’s technology is fully compliant with U.K. legislation and relevant E.U. directives. This has been confirmed by BERR and by the U.K. regulatory authorities and we note that there is no suggestion to the contrary in the Commission’s statement today.” The company added, “We do not envisage the Commission’s proceedings will have any impact on the company’s plans going forwards,” it added.

U.K. authorities will now have two months to reply to the Commission, after which it may decide to issue a reasoned opinion, the second stage in an infringement proceeding such as this. The Commission could eventually refer the case to the European Court of Justice.

The news follows a period of intense E.U. scrutiny concerning the online ad industry. Earlier this month, Consumer Affairs Commissioner, Maglena Kuneva, hinted strongly that further legislation may be necessary if online firms fail to clean up their act regarding the collection of consumer data, specifically concerning user education and consent.

Phorm, meanwhile, continues to defend its technology from critics, and held a “town hall” event in London last week designed to address further concerns surrounding user privacy.