The government is being urged to respond to privacy concerns raised by the European Commission (EC) over controversial targeted advertising system Phorm.

Phorm is used by ISPs to track users' online surfing habits and then delivers relevant adverts - a practice that's raised a number of concerns from privacy campaigners. However, Phorm claims its 'anonymises' the information about web users so they are impossible to identify.

The EC is awaiting a response to a third letter sent to the government at the end of January, according to Martin Selmayr, spokesman for Viviane Reding, Europe's telecommunications commissioner. The content of the letter hasn't been revealed.

The latest query comes after the commission was unsatisfied with responses to two previous letters, sent in July and October 2008.

"The Commission is asking that the UK ensure it is complying with EU law," said Selmayr's office. "The commission may have to proceed to formal action if the UK authorities do not provide a satisfactory response to the concerns on the implementation of European law in the context of the Phorm case."

Phorm says the system lets advertisers reach more receptive customers as well as generate a new revenue stream for ISPs. But activists have concerns over how the system impacts people's privacy.

Phorm took much heat after it was revealed BT conducted trials of the system without people's consent in 2006 and 2007. A few savvy BT customers noticed technical irregularities when they were browsing the internet, which brought Phorm much press attention.

The BT secret trials could have potentially violated the UK's Data Protection Act, which mandates that personal data can't be processed without consent. The trials could have also conflicted with the Regulation of Investigatory Powers Act of 2000, which makes it illegal to monitor communication between two entities without proper consent.

The Crown Prosecution Service is currently looking into those secret trials, but has not made a decision on whether to prosecute.

BT concluded another trial between September and December, where around 10,000 users were given the option of whether they wanted to participate. BT plans on rolling out Phorm at some point but has not set a date and is still reviewing the results from the technical trial, said a BT spokesman.

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