The European Commission has started legal action against Britain over the online advertising technology Phorm.
It follows complaints to the EC over how the behavioural advertising service was tested on BT's broadband network without the consent of users.
Last year Britain had said it was happy Phorm conformed to European data laws.
But the commission has said Phorm "intercepted" user data without clear consent and the UK need to look again at its online privacy laws.
In a statement, Phorm said its technology was "fully compliant with UK legislation and relevant EU directives".
It added that it did not believe the Commission's legal action would have "any impact on the company's plans going forwards".
At the heart of the legal action by the EC is whether users have given their consent to have their data intercepted by the advertising system.
ITU Global Cybersecurity Agenda