The European Commission has warned the UK government it needs to take action to protect consumer privacy due to concerns about targeted advertising company Phorm, a Dow Jones report said.
The Dow Jones report also quoted European Union communications commissioner Viviane Reding saying the commission was concerned Phorm was breaching consumer privacy directives and the UK government needed to take action.
Phorm's technology tracks consumer activity on the internet.
The company has agreements with the UK's three largest internet service providers - BT Group, Carphone Warehouse's Talk Talk and Virgin Media, the Dow Jones report said.
'It is very clear in EU directives that unless someone specifically gives authorization (to track consumer activity on the web) then you don't have the right to do that,' Reding said.
She said she was 'a little bit worried about this development,' and as a result her office sent a pre-warning letter to UK authorities earlier this month.
If the UK government didn't resolve the issue, the commission could take it to the European Court of Justice, the official said.
A Phorm spokesman said he wasn't aware of this development, the report further said.