Phorm has dismissed the European Commission’s announcement of an investigation into the use of its behaviour-based advertising technology by UK internet service providers as unlikely to have any impact on its plans.

On 14 April, the EC called on the UK to ensure that its national authorities – in this case, telecoms regulator Ofcom and data protection watchdog the Information Commissioner’s Office (ICO) – had sufficient sanctions at their disposal to enforce EU legislation on the confidentiality of communications.

According to the EC, this would allow the UK to respond more vigorously to new challenges to e-privacy and personal data protection such as those that have arisen in the Phorm case and also help reassure the UK public about their privacy and data.

In a statement, Phorm said: “Our technology is fully compliant with UK legislation and relevant EU directives. This has been confirmed by BERR [the UK’s Department for Business, Enterprise and Regulatory Reform] and by the UK regulatory authorities and we note that there is no suggestion to the contrary in the Commission’s statement today.”

Phorm added that unlike other online advertising systems, its technology did not store personal data or browsing histories. “Consistent with UK and EU legislation, and in anticipation of any changes that may be made to the law in the future, our system offers unmissable notice and clear and persistent choice to consumers.”

EU e-privacy and personal data protection rules prohibit interception and surveillance of communications without the user’s consent.

Viviane Reding, European commissioner for information society and media, said: “Internet behavioural advertising can be useful but it must be used in a way that complies with EU rules. These rules are there to protect the privacy of citizens and must be rigorously enforced by all member states.

“We have been following the Phorm case and have concluded there are problems in the way the UK has implemented parts of EU rules on the confidentiality of communications.”

Phorm’s technology works by constantly tracking and analysing individuals’ internet browsing to determine their interests and then deliver them targeted adverts. Since April 2008, the EC has received a slew of complaints from both UK citizens and UK members of the European Parliament.

Last year, BT, the UK fixed-line operator, admitted to testing Phorm in 2006 and 2007 without informing customers involved in the trial. It also carried out an invitation-based trial of the technology in October 2008. BT’s trials resulted in a number of complaints to the ICO and the police.

Under UK law, it is an offence to intentionally intercept communications. However, an interception is considered lawful when the interceptor has “reasonable grounds for believing” that consent to interception has been given.

The EC is also concerned that the UK lacks an independent national supervisory authority for dealing with such interceptions.