The Office of Fair Trading (OFT) has today demanded new rules to protect shoppers from online advertisers that benefit from collecting private information about internet users' browsing history.
The OFT said that users' privacy was being jeopardised by specifically targeted online advertising companies, which collect personal data in this way.
The watchdog said that the recent surge of "behavioural advertising" campaigns raised significant "privacy issues" and the "possibility for the misuse of personal data".
The OFT requested that websites should inform users when data is being collected about their online activity. Not only this but the watchdog said that the sites should tell users what their data will be used for and clearly label adds that are specifically targeted at them.
The OFT's report has taken seven months to produce, and warns that the institution will consider formal regulation of the industry unless companies act to protect consumers' interests online.
The report requested that the trade association for online advertising, Internet Advertising Bureau (IAB), should "provide clear notices alongside behavioural adverts and information about opting out".
"Should industry action prove ineffective, the OFT and the Information Commissioner's Office (ICO) are strengthening the effectiveness of regulation by seeking a memorandum of understanding to establish in which circumstances the ICO or the OFT would take enforcement action," the report states.
Senior director of the OFT's consumer market group, Heather Clayton, said: "The OFT is keen to engage with industry players and consumer groups while behavioural advertising is in its relative infancy, and before targeted pricing takes hold, so that the market develops in a way that protects consumers from bad practice.
"Discussions now about the potential for both benefits and harm, and how consumer protection legislation applies, will stand us in good stead in the event that industry action proves ineffective or targeted pricing becomes a reality."
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