Online targeted advertising under scrutiny

The OFT's report follows a rapid increase in "behavioural advertising", in which organisations collect information about online shoppers through "cookies", tiny files which are placed on a user's computer after their first visit to a website.

The information is used to target shoppers with personalised advertisements.

The report found that more could be done to provide consumers with better information about how their personal information is collected and used.

The OFT said it would encourage the online trade association Internet Advertising Bureau (IAB) to work with the industry to provide clear guidance to consumers about opting out of the practice.

OFT spokeswoman Heather Clayton said: "The OFT is keen to engage with industry players and consumer groups while behavioural advertising is in its relative infancy, and before targeted pricing takes hold, so that the market develops in a way that protects consumers from bad practice.

"Discussions now about the potential for both benefits and harm, and how consumer protection legislation applies, will stand us in good stead in the event that industry action proves ineffective or targeted pricing becomes a reality."

IAB director of regulatory affairs Nick Stringer welcomed the report: "The OFT's document is a step forward for the industry and we will work together to raise awareness of the choices that consumers have online and create consistency across the industry.

"IAB research found that any consumer concerns decrease when presented with the relevant information about behavioural advertising as well as the tools to turn it off. The online advertising industry has already made a serious commitment and investment to safeguard consumer privacy whilst delivering a more relevant online experience."