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The Cookie Crumbles

On the 13 November 2001 the European Parliament voted to accept an amendment to the draft directive on personal data and privacy in the electronic communications sector (ìElectronic Communications Directiveî) which prohibits the placing of cookies on users' computers without their explicit consent.

A cookie is an identifier sent by a web server to a web browser which enables the server to collect information about a user. Many online businesses place cookies on computers accessing their websites to enable them to store information about a particular user on the user's own computer. Cookies are frequently used to monitor Internet traffic and record users' preferences when visiting a particular website. Many website operators use the devices to determine where to place or purchase banner advertisements to draw potential visitors to a website and to build up demographic profiles of users.

The recent controversy surrounding the use of such devices by e-businesses arises from the fact that cookies can store personal information such as names, e-mail addresses, telephone numbers and details of previous Internet searches without the explicit approval of the relevant user. The European Parliament is of the view that cookies ìmay seriously intrude on the privacy of usersî and argue that the use of such devices should be prohibited ìunless the explicit, well-informed and freely given consents of the users concerned have been obtainedî. The amendment does not therefore prohibit the use of cookies but requires e-businesses to inform users about the existence of such devices and obtain their explicit approval before placing them on their hard drives. The Electronic Communications Directive still has to be approved by the European Council, which could vote against the European Parliament's proposal. A common position is expected to be adopted in December which will be returned to Parliament for a second reading early next year.

Critics of the proposal argue that cookies are an essential piece of Internet browsing architecture and allow websites to offer a better service to users. For example, cookies enable a website to greet a repeat visitor by name and provide recommendations based on past purchasing patterns thereby providing the user with a more personalised service. They also enhance the reliability and the speed of ìsurfing the netî.

The controversial amendment has alarmed Europe's online business community who believe the restriction will seriously impede the growth of e-commerce. The Interactive Advertising Bureau UK (IAB) estimates that the amendment could cost British companies £187m in lost advertising revenue. In addition, users will be forced to re-register or re-enter preferences each time they revisit a website. Opponents of the proposal fear that the extra time, effort and frustration involved in doing so may deter users from purchasing goods or services online and fear that e-commerce could suffer as a result.

An EU Advisory Body on Data Protection produced a working paper in November last year entitled ìPrivacy on the Internet - an integrated EU Approach to online Data Protectionî. They recommended that online businesses should always notify users about the processing and use of their data for profiling purposes and that e-businesses should inform users before any cookies are placed on their hard drives. They also recommended that personalisation of users' profiles should require the informed prior consent of such individuals by way of an ìopt-inî and that users should have a right of access to their online profiles. These recommendations have yet to be implemented in Europe and would undoubtedly face tough opposition from businesses involved in...