The police were handed information about BT and Phorm from campaigners who protested at BT's annual shareholder meeting in July.
An e-mail from City of London Police to one privacy campaigner, Alex Hanff, reads: "The matter will not be investigated by the City of London Police as it has been decided that no criminal offence has been committed.
"One of the main reasons for this decision is the lack of criminal intent on behalf of BT and Phorm, in relation to the tests. It is also believed there would have been a level of implied consent from BT's customers in relation to the tests, as the aim was to enhance their products."
The decison not to investigate has been slammed by the Foundation for Information Policy Research, which believes BT and Phorm acted wrongly.