The European Union (EU) has written to the UK government asking it to clarify whether a new system being used by ISPs to monitor web traffic conforms to data protection laws.

The Phorm system tracks users' web habits and puts them into categories so that advertising can be targeted more effectively.

Phorm insists its technology enhances privacy because information is anonymised.

Virgin Media and Talk Talk have signed up to try the technology, as has BT, which suffered criticism after it was revealed that the company had tried the technology on web users without telling them.

The UK privacy watchdog has examined the technology and agreed to the trials as long as users are given the option of opting out.

The UK government has until the end of August to respond to the letter from Viviane Reding, EU commissioner for information society and media.