EU panel rejects online ad rule proposals

The European Union's top privacy advisory panel on Thursday rejected a code of conduct written by Internet companies for protecting the personal data of online users.

The panel said the plan, which would allow advertisers to police themselves, doesn't satisfy the EU's online privacy laws

. The decision jeopardizes a deal struck earlier this year between the European Commission, the EU's executive arm, and the world's biggest Internet companies allowing them to comply with EU rules by adopting the code.

The code covers "behavioral advertising," the practice of gathering data on users' Internet surfing habits for the purpose of piping targeted advertising onto their computer screens. The code requires websites to seek permission from users before gathering information that can be used to identify them personally, and it requires websites to give visitors the ability to "opt out" from having their data gathered.

The advisory panel, composed of national EU privacy regulators, said the code and an accompanying website give the false impression that it is possible not to be tracked while surfing the Internet.

"This wrong presumption can be damaging to users, but also to the industry if they believe that by applying the code they meet the requirements of the (EU rules)," the panel said in a statement.

The code was drafted by the Interactive Advertising Bureau and the European Advertising Standards Alliance, which represent Internet heavyweights such as Microsoft Corp. and Yahoo! Inc.