The European Union’s Cookie Directive was adopted by member states in late May of 2011, but allowing up to a year to implement the legislation. Now approaching the deadline, reports have found that a high percentage of major organizations in the UK are not yet in compliance and that the costs of the opt-in cookie regulation are substantial on eCommerce business.
The European Parliament’s Directive 2009/136/EC, dubbed the Cookie Directive, amends the prior Directive on Privacy and Electronic Communications and the Universal Services Directive of 2002. The major changes resulting from the Cookie Directive are that consumers must opt-in to allowing cookies rather than being given the option to opt-out and that organizations must provide comprehensive and clear information about what the cookies are specifically used for. Requiring users to opt-in to accepting cookies is expected to cause a substantial decrease in the number of web users in the EU that allow cookies, which will in turn deplete revenues from behavioral advertising, retail optimization and other services that rely on the use of cookies.
In an analysis of 55 major UK organizations in both private and public sectors KPMG found that 52 of these organizations were not in compliance with the new Cookie Directive less than 50 days before the directive becomes enforced in the UK. But with the total potential costs of the Cookie Directive in the UK estimated in the billions of pounds, it is no surprise that most are waiting until the deadline, May 26, before becoming compliant. The UK’s Information Commissioner’s Office (ICO) has been trialing a compliant cookies opt-in solution on their website, but with only a 10 percent opt-in rate.
If a large portion of web users do not opt-in to cookies the effects on various eCommerce industries may be substantial. Targeted advertising, or behavioral advertising, based on users past online activity relying on cookies could suffer potential costs of £648 million. Retail optimization, such as a retailer making suggestions on items to buy based on the user’s purchase history, could suffer potential losses as high as £1.389 billion as a result of the cookie legislation in the UK. These figures were estimated by Qubit, a customer data platform that offers a tool for implementing cookie consent, who also estimates that the cookie legislation could cost the affiliate marketing industry £80 million and that in a worst case scenario could cost the UK economy £10 billion.
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