UK: Privacy & Cookies

Last Updated: 15 April 2002
The commercial imperative to comply with best data privacy practice was recently illustrated in the settlement of the DoubleClick case. DoubleClick had to pay $1.8 million to settle actions arising from its improper use of information collected using "cookies". This article focuses on cookies, explaining what they are and what steps your organisation needs to take to use them safely.


Cookies: giving web sites memory

The Internet uses Internet Protocol (IP) numbers to route information. Every computer that is logged on to the Internet will have an IP number (effectively the computer’s "street address"). However, a user accessing a web site will usually be anonymous to the web site owner unless he provides his name or email address (e.g. as part of a purchase or by subscribing). Collecting information about visitors is made even more difficult by the fact that most visitors do not have a static IP address - a visitor’s Internet Service Provider assigns the visitor a new IP address each time he logs onto the Internet.

To overcome the anonymity associated with dynamic IP addresses, most web sites use cookies. A cookie is a small text file containing a unique identifier (e.g. a large number) assigned by the web site. The cookie is deposited on the hard drive of the web site visitor’s computer when he accesses the site. At its simplest, a cookie enables a web site to "recognise" a repeat visitor whatever the IP address. For this reason, cookies have been described as giving web sites "memory".

The ability of a web site owner to link a cookie to information the web site collects about the user’s previous purchases or visits provides a web site owner with an incentive to collect information relating to that user. This information may be actively provided by the visitor, such as names, email addresses and telephone numbers, or it may be collected passively e.g. information on which pages were viewed or whether the user visited the site via a search engine or directly.

Cookies allow a web site owner to personalise a user’s experience of the site and to build up a "profile" of its visitors. Examples of personalisation include: ensuring that a visitor is not shown the same advertisement twice; making it unnecessary for a visitor to re-register or re-enter a password and suggesting new products chosen on the basis of a customer’s previous purchases.

The UK’s Direct Marketing Association describes cookies as "an integral information gathering tool for web traders" and states that "[cookies] are used to determine the most visited areas of a site and the browsing habits of users. This information in turn enables web traders to effectively plan their advertising and marketing strategy".

"Third-party" cookies, which do not originate from the web site being visited (but typically come from advertisers on the site) are often simultaneously placed on a web site visitor’s computer hard drive. Whether "first-party" cookies or "third-party" cookies, in the vast majority of cases, cookies are used without the explicit approval of the relevant user.

There is a growing range of software products available which include features such as blocking cookies, allowing cookies to be deleted or including pop-up boxes to alert the user when a third-party cookie has been received by his computer.


Privacy and Cookies

The current position
As explained above, cookies are simply an identity tag to facilitate the collection of data from web site visitors and are not specifically referred to in the Data Protection Act 1998 or its underlying Directive (please click here for further information). Nevertheless, the requirements of the Act are likely to apply to the collection and use of personal data accumulated using cookies1. Once the web site owner has sufficient information to identify a particular user whose computer has accepted a cookie, then arguably that entire collection of data relating to that user will be personal data2. As can be seen from the definition in the Act, information easily becomes "personal data". The Information Commissioner has made it clear that, in the on-line world, personal data do not need to be "traditional" identifiers, such as name, address, etc., but only information that "uniquely locates [the user]...by distinguishing him...from others".

Data protection obligations regarding the use of cookies by a web site operator include the following:

  • Inform the web site visitor that cookies (or ‘tracking technology’) enabling the collection of personal data (within the broad meaning of this term) are used on the site. The Information Commissioner’s current view is that a site will not be compliant with the Act if this information is provided only in the privacy policy;
  • Ensure that visitors know who is the data controller of data collected using cookies (and generally)3;
  • Ensure that visitors know the purposes for which the information collected using cookies will be used;
  • Ensure that visitors are provided with any other information necessary in the circumstances to enable the processing to be fair;
  • If a third party data controller obtains a person’s "profile" information other than from the individual himself, there is an obligation on the third party to ensure that the person knows the party’s identity, the purposes of the processing and any other information necessary for fairness;
  • Compliance with the other data protection principles in the Act. To test for this compliance, ask the following questions:
    • Will the data collected only be used for the purposes specified to the web site visitor?
    • Are the data collected excessive in relation to the purposes for which they are collected?
    • How long will the data be stored?
    • Are any of the data sensitive personal data, as defined in the Act (see case study below)?
    • Will data be transferred outside the EEA to countries lacking adequate protection?
    • Does your privacy policy explain that advertisers may also send cookies?


The Future - Too Many Cooks leading to Half Baked Notions?

The European Parliament is in the process of enacting a new Directive on the processing of Personal Data and the Protection of Privacy in the Electronic Communications Sector (the "Privacy Directive") aimed at regulating practices, such as the use of cookies and unsolicited commercial emails or "spam".

Cookies
In November 2001 the European Parliament voted to accept an amendment to the draft Privacy Directive making it unlawful to place cookies on users’ computers without their explicit consent i.e. an opt-in system. ("The Cookie Crumbles" by Mark Turner and Mary Traynor provides more background on the initial debate, click here).

However, on 21 January 2002, the Council released its amended version of the draft Directive which provides for a modified opt-out system for cookies (Please click here to access The Council's updated text of the Privacy Directive). The Council’s draft provides only that the recipient must be given sufficient information, and the opportunity to refuse (i.e. opt-out). The UK Information Commissioner is known to be in favour of an opt-in system for cookies.

Spam
Here, too, support is divided between opt-in and opt-out, with the European Parliament in favour of letting each Member State choose between an opt-in and an opt-out rule. However, European ministers responsible for telecommunications took a strong stance in favour of the opt-in rule during a recent meeting of the European Council. They wanted to limit the opt-out approach to the situation where a supplier which has previously obtained a consumer's contact information through a pre-existing commercial relationship wishes to send its client further commercial offers.

The Council’s amended version of the Directive provides for an opt-in system for spam (although, where customers have previously consented to direct marketing, an opt-out system will apply).

In summary, the views of the European Parliament and the Council are as follows:

  Parliament Council
Cookies opt-in opt-out (provided recipients are given sufficient information)
Spam individual Member States to decide between opt-in and opt-out opt-in (an opt-out system may operate for existing customers)

The European Parliament must now either reconsider its view or ratify the revised text. In a recent communication to the European Parliament the Commission has made clear its support for the views of the Council and has asked the Parliament for a rapid agreement on the proposed Directive, as it is the only outstanding element of the new telecoms package.

1Web sites operated within the UK will be covered by the Act. Even a web site established outside the EEA could be subject to the Act if, for example, the site is hosted in the UK or where a cookie is placed on the computer of a UK internet user to create a profile of that user’s on-line behaviour.
2Personal data are defined as data which relate to a living individual who can be identified from those data (alone) or those data and other information in the possession of, or likely to come into the possession of, the data controller.
3These provisions are found at paragraph 2 of Part II, Schedule 1 and Section 7 of the Act.


Case Study: Bliss Records and Banner Advertising

We thought readers would find it helpful if we illustrated the above principles by reference to a hypothetical case study.

Bliss operates a highly successful online business selling books, CDs and DVDs. Part of its success is due to its use of technology to personalise the shopping experience for regular customers. Based on past usage patterns, a customer returning to the Bliss web site will be greeted by the "member name" chosen by the user and will automatically be recommended new books and music. The web site’s popularity has also enabled Bliss to earn a moderate revenue stream from advertising. Banner Advertising pays Bliss a monthly fee for the right to place banner advertisements on behalf of a number of its clients at the top of each page on the Bliss web site.

Every time a user visits the Bliss web site, the site checks the user’s computer to see if there is a Bliss cookie. If it finds one, Bliss will then add information about that visit to all the other information in its database that corresponds to that cookie. If there is no cookie, the web site will post one to the user’s computer.

Banner Advertising’s clients also send the customer cookies when a user visits the site.

The effect of the Data Protection Act 1998
Bliss is processing the information it collects via the cookies to tailor the web site to the individual visitor. The Act requires that personal data be processed fairly and lawfully. There may also be some "sensitive personal data" collected e.g. the customer’s selection of CD’s, DVDs and books may indicate particular political opinions, religious beliefs or sexual preferences. The Act imposes more stringent requirements in relation to the processing of sensitive data.

Consideration should also be given to the compliance of Banner Advertising’s clients with the Act, given that they are also likely to be collecting personal information using cookies. This will be especially relevant if there is any agreement in place for Bliss and Banner Advertising to share customer data. Bliss should alert visitors at the time they come onto the site to that fact that cookies (including third-party cookies) will be sent. This information should not just be included in Bliss’s privacy policy.

The impact of the proposed Privacy Directive
If the EU Parliament’s opt-in system is adopted, it will require Bliss to obtain the consent of each customer to the use of cookies before they are used. Understandably, most industry participants would not like to see that view prevail.

Alternatively, if the EU Council’s modified opt-out system is used, clear and precise information about the use of cookies will need to be shown to the customer the first time that they use the web site. Cookies can then be used unless the customer specifically requests not to receive them.

Regardless of which view prevails, Bliss would also need to consider the compliance of Banner Advertising when the proposed Privacy Directive enters into force.

Data Protection Act compliance and cookie usage will affect the vast majority of web sites. Most web sites, even corporate web sites that only provide information and do not sell any goods or services, use cookies to collect information about users.

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