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26th May 2011

They don't know what to do to comply, says the report. Most companies currently collect information about people who visit their websites  using so-called "cookies" or small pieces of tracking code. However, this will become illegal under the new European Union rules, and punishable in the UK, for example, with fines of up to £500,000. The new law requires user's consent before using cookies – the text files that help organise and store browsing information.

The data protection watchdog has given web companies an extra year to comply with new privacy laws designed to give users control over how they are tracked and profiled online, according to the Daily Telegraph. The Information Commissioner said he will not take any action against companies flouting the rules, which are supposed to come into force today, until next year.

"We're giving businesses and organisations up to one year to get their house in order," said Christopher Graham in a speech to advertisers today, as reported in the Daily Telegraph.

The changes, based on a European directive, mean that websites will need to get visitors' consent to install a "cookie" in their browser.

Companies operating in the region must now get permission from web users for this kind of tracking, but there is little guidance on how they should do so.

Internet and social media companies such as Facebook and Google are particularly concerned that the new laws could affect their businesses, says the Financial Times website (paywall). Advertisers are worried that the market for highly targeted internet advertising – worth nearly £100m a year in the UK alone – could be damaged.

The laws will touch every company that does business over a website. Any site that sells products or carries advertising will use cookies. Cookies can track items that a customer is putting into a website shopping basket, for example, or note the web pages individuals visit and send this information to advertising companies. Most websites will have between 10 to 20 cookies; big corporations with multiple websites could have hundreds or even thousands in use.

Online privacy is becoming a growing issue for consumers. Large scale data loss incidents, such as the recent hacking on Sony's network, are making people increasingly question what details companies should collect and keep about them.

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