BT is facing an investigation by the Crown Prosecution Service (CPS) over allegations that its trials of the targeted online advertising system  from Phorm contravened privacy laws.

The CPS is investigating whether tests of the Phorm service by BT in 2006 and 2007, where BT did not ask customers' permission before running the tests, broke  the Regulation of Investigatory Powers Act (RIPA), which prohibits the interception of online data without consent.

An investigation by the City of London Police conducted earlier this year found that the tests were not illegal,  but the CPS has opened an investigation of its own after privacy campaigner Alex Hanff filed a private prosecution. If BT is found to have broken RIPA , the case will be referred to the Director of Public Prosecutions.

BT argues that it did not use the data accrued in an illegal fashion and claims that it sought legal advice before running the trial.

Phorm is behind technology that analyses web users' behaviour in a bid to serve up more relevant advertising. The company has been criticised because of fears that its technology will allow internet companies to spy on users. However, it has taken great pains to explain that data privacy is one of its major concerns and that because of the way its targeting works, no identifying information is retained on web users. But many people, including Tim Berners-Lee have expressed grave concern over Phorm.

In a separate development four Directors quit Phorm yesterday -  its non-executive chairman Steven Heyer, chief operating Officer Virasb Vahidi and David Dorman and Christopher Lawrence, following differences of opinion with chief executive Kent Ertugrul.

In our opinion Phorm itself does not contravene data privacy – however, we suspect that it faces an uphill battle against a very sceptical public – something that will weigh very heavily on anyone thinking of signing up to Phorm.