Reding, who was in the U.K. recently, has already warned banks that they would be required to notify customers regarding any breach in data security. This instruction will now be valid for all businesses operating in the EU.

The earlier data protection laws, which were written back as in 1995, did not cover the Internet sufficiently, as it was only a fledgling industry then.

However, the Internet has expanded at an unprecedented rate over the years. Popular sites like Facebook and Google and gaming networks like the PlayStation Network have generated huge databases and there have been several instances of these databases being breached of user privacy. The EU commissioner intends to put an end to such breaches.

“Only recently, we witnessed a massive security theft in online gaming services affecting millions of users around the world,” Reding said. “This incident highlights why companies need to reinforce the security of the information they hold. Frequent incidents of data security breaches risk undermining consumers’ trust in the online economy.”

So far, Facebook has not breached any EU laws regarding user privacy, as they are based in the U.S. The new laws will be applicable to all businesses and services operating within the European Union, irrespective of where the company is based.

Viviane Reding has said, “The law is for everyone who does business on the territory of Europe, whatever the origin of the business might be. So you cannot hide anymore by saying ‘I do not have my headquarters in Europe’.”

There will, no doubt be difficulties in implementing these new laws for companies based outside Europe. Any action that needs to be taken, will have to be done through the nearest responsible national data protection authority.

The complaints were lodged by price comparison site Foundem legal search engine eujustice.fr. Another search engine, Ciao, based in the U.K. and owned by Microsoft has also complained.

According to the BBC, these sites have alleged that Google manipulates its search results as a result of which these sites get a lower ranking than they deserve.

A statement from EU says “The European Commission has decided to open an antitrust investigation into allegations that Google has abused a dominant position in online search.”

The EU has decided to take this action based on the complaints which allege that Google gives unfavourable treatment to these sites while Google sites receive preferential treatment.

A Google statement says, “Since we started, Google we have worked hard to do the right thing by our users and our industry, But there’s always going to be room for improvement, and so we’ll be working with the Commission to address any concerns.”

The EU has clarified that the launch of the probe does not signify that Google is guilty, but they will treat the complaints seriously.

Sir Martin Sorell Chief Executive of WPP the world’s largest advertising agency says, “Search is the portal to the internet and Google has a colossal share, I do not think that the investigation is surprising, given the strategic importance of the internet.”

In their complaint Foundem has said that sites such as Foundem duplicate most of their results which causes them to receive a lower ranking.

Ciao on their part have complained that Google imposes some exclusivity obligations which prevent them from using the same ads on other sites. But Google refutes that claim too. They say they had a good relationship with Ciao until it was taken over by Microsoft.

This new technology ‘keeps track of’ the websites that users visit, if their ISP has signed up with this service.

Feedback: The representative says, “Phorm does not view or store the sites users visit. Phorm uses technology that has been built from the ground up to avoid any information that might identify a customer personally. Phorm’s system stands out from other online advertising systems in that it does not store your browsing history, IP address, or any personally identifiable information. The unique design of Phorm’s technology ensures that consumer privacy is protected and that, even under compulsion, no personally-identifying data or detailed browsing data can be retroactively provided to anyone.”

While it is a good thing that Phorm does not, at present, identify users individually, that does not change the fact that it tracks user activity, which many would consider to be spying.

But this is being done without the express consent of the users. BT admitted to using this technology without asking for its users’ consent initially. The BT trial, called Webwise, ended in 2008.

Feedback: According to them, “Phorm offers a clear consumer choice. Before any ISP launches Phorm’s service they will evaluate several different approaches to opt in and opt out and decide what best suits their customers. Whatever the format, users will be provided with clear details on what the service offers, and how it works, so that they can make an informed choice as to whether to participate. The most recent BT trial was conducted on a completely opt in basis.”

Tracking user interests helps the service provider to serve better targeted and more relevant ads to the customer in future, thus keeping the customer happy and helping the service provider to generate more revenue.

Phorm’s service is not very different from Google’s own ad and organic search results delivery service. Google can track a lot more sensitive information, including content not found directly through a Google search. However, Google is a much loved brand and hence gets away with a lot more “evil”.

According to the BBC, the UK Home Office has been accused of ‘colluding’ with Phorm.

A spate of messages have been exchanged between the Home Office and Phorm since August 2007, in which Phorm asked the Home Office if they have no objection to this technology, while the Home Office asked for more information about it, ostensibly to better understand public safety considerations and legal obligations. They have denied giving any advice to Phorm about possible criminal liability.

Baroness Sue Miller, Liberal Democrat Spokeswoman on Home Affairs however, says, the Home Office was interested in this technology to help with their agenda of counter terrorism.

Phorm’s Chief Executive, Kent Ertugrul however, says, the Home Office has only given an ‘informed opinion’ on the matter.

In the meantime, the BBC reports that the European Commission has started legal action against Britain, for allowing the use of this technology, following complaints about this service being used on BT, without user consent.

Feedback: Their spokesperson points out, “Phorm’s technology can be operated in a manner that is legally compliant with UK legislation and relevant EU directives. This has been confirmed by BERR and by the UK regulatory authorities. 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, a choice that is head and shoulders above current internet standards. The EU Commission announced infringement proceedings against the UK Government concerning the alleged failure of UK legislation to conform in certain respects with EU e-privacy and personal data protection rules. This is a matter for the Commission and the UK Government to discuss.”

The results of this matter, of course, remain to be seen.

British officials had said, last year, that Phorm conformed to European data laws. As can be seen in their feedback above, Phorm says its technology is “fully compliant with U.K. legislation and relevant E.U. directives.”

EU’s Telecom Commissioner, Viviane Reding however said, “Britain needs to change its laws to ensure proper sanctions to enforce E.U. confidentiality rules.”

If the UK does not voluntarily do so, Reding could take matters to the European Court of Justice, which would then have the final say in the matter.

Several individuals and organisations that advocate user privacy have approved of the European Commission taking an active interest in the matter.

To tell their side of the story, Phorm has created a website that attempts to rebuild its reputation, demistify the technology and clarify rumours that are currently being spread against the company.

Stop Phoul Play

The Article 29 Data Protection Working Party, which deals with the protection of the privacy of citizens in the EU, is of the opinion that the search engines should delete all identifiable data of the user after 6 months, as the search engines keep tabs on what their users are searching for, or buying and from where etc.

Getting the search engines to accept this demand is not going to be easy, and it may take a long time to come to a mutually acceptable agreement.

It will not be possible for the EU to force their decision on the Search engines, as these companies run their operations worldwide, and it is not possible for them to use a different set of rules regarding privacy, for each country or region they operate in.

The Article 29 Data Protection Working Party does not have the power to enforce their decisions on the search engine providers, but they are currently discussing, the length of time after which user data should be deleted. They are also discussing how effective the measures taken by the search engine providers are, to protect the privacy of the user.

While the IP address is the most reliable and efficient clue to the users location even that is not 100% accurate.

The largest Search engine in Europe, Google, (which holds almost 80% of the market share) will obviously be in a position to call the shots here. They had agreed in September to cut down their data retaining time, from 18 months to 9 months.

Yahoo had offered to cut down to 13 months.

On the other hand Microsoft, which holds only about 2% of the market share, has agreed to accept the EU demands fully provided all others agree to do so.

The reason search engines wish to hold on to user data for a long time, is that they make use of it to find their target audience for the purpose of advertising which is their main source of revenue.

It looks as though the best way to get the search engines to agree to the EU demands would be to put pressure on them through the users while continuing negotiations across the table.

The deal was cleared after almost one year of negotiations. Google shares rose by 6 percent or $26 on the day, stopping a continued slide that would have landed the stock at below $400 had it not been for the announcement from the EU.

Layoffs at DoubleClick in the U.S. and elsewhere are very likely after a process of job matching. The reductions will initially be carried out in the U.S. by April and elsewhere thereafter. According to CEO Eric Schmidt, “As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well.”

Performics, the search engine marketing part of DoubleClick should be spun off, since owning a search engine optimisation agency would present a direct conflict of interest. However, Google refuses to confirm that this will happen, especially since the EU legislators have not placed any conditions on the merger.

Sales and account management functions are likely to face the most reduction in workforce when the two companies align forces.
Google will now have access to one of the leading display advertising platforms. In additiona to the obvious use of Doubleclick’s inventory to offer even more ad space to Google AdWords advertisers, they will also use DoubleClick’s technology to improve effectiveness and measurement of performance of digital media for advertisers and publishers.

Engineers at Google report that some DoubleClick tags will also soon be allowed in Google AdWords, enabling better performance tracking for advertisers already using the platform for display advertising.

Announcements about the Google – DoubleClick merger nicely match the timing of the launch of Google’s Ad Manager tool, which according to Google Senior Project Manager Rohit Dhawan is “a free, hosted ad and inventory management tool that can help publishers sell, schedule, deliver and measure their directly-sold and network-based ad inventory.”

The EU Commission has set itself a 140-day deadline. The investigation should be completed by 2 April 2008. This is the first major setback Google has ever faced in its nine year history. This news will likely keep Google’s stock below the $700 mark it had crossed last week.

Eric Schmidt, CEO of Google, said in a statement, “We are obviously disappointed.” Assuring investors and the press that the company would work with the commission, he added, “We seek to avoid further delays that might put us at a disadvantage in competing fully against Microsoft, Yahoo, AOL and others whose acquisitions in the highly competitive online advertising market have already been approved.”

If EU regulators rule against Google, it could influence the US Federal Trade Commission’s ruling as well. Either way, this delay could actually damage Google’s chances of competing with Microsoft and Yahoo! in the online display advertising market.

Microsoft officially entered the market in May with the aQuantive, a month after Google bought DoubleClick. Microsoft’s acquisition passed regulatory approval in August whereas the Google-DoubleClick deal ran into trouble, first inviting scrutiny from the FTC and then the EU Commission.

Similarly, Yahoo! acquired Right Media and Blue Lithium to keep up with Google and Microsoft. Their deals have also managed to avoid scrutiny. This isn’t surprising, though, considering Google controls more than 80% of the paid search advertising market, whereas both Yahoo! and Microsoft have less than 10% market share in Europe.

While Google wades through legal loopholes, Microsoft could potentially build up a strong offering and establish a lead that could make things difficult for Google / DoubleClick in the future. Whether they can actually pull it off and make good use of the time “gifted” to them by the EU Commission remains to be seen.