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The European Parliament will vote next week on whether to make cookies illegal.
The proposed ban is part of wider legislation based on a report on data protection drafted by Italian MEP Marco Cappato. The legislation also aims to deal with unsolicited commercial e-mail, commonly known as spam.
"So-called cookies, spyware, Web bugs, hidden identifiers and other similar devices that enter the users' terminal equipment without their explicit knowledge or explicit consent in order to gain access to information, to store hidden information or to trace the activities of the user, may seriously intrude on the privacy of these users," the draft legislation reads.
"The use of such devices should therefore be prohibited unless the explicit, well informed and freely given consent of the user concerned has been obtained," the legislation adds.
Users will become so frustrated at having to re-register or re-enter preferences every time they re-visit a Web site, they will lose interest in e-commerce altogether, the organisation said in a statement.
Cookies, far from being a violation of privacy, actually protect users by ensuring that they are genuine visitors to a site, as opposed to someone with a stolen password, the IAB said. They are used to legitimately authenticate and speed up a user's identification and e-commerce transactions, the group added.
The company said it observed all regulations and that it had signed the European Union-US Safe Harbour agreement, which allows companies to export personal data about their customers from Europe to the US. The agreement works under the European Union data protection directive, which outlaws the transfer of personal data to countries.