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The UK Information Commissioner's Office voiced legal concerns over Webwise, and has said it would only be legal as an "opt-in" service, not an opt-out system.

The European Commission called on the UK to protect Web users' privacy, and opened an infringement proceeding against the country in regard to ISPs' use of Phorm.

Context Plus shut down its operations in May 2006 and stated they were "no longer able to ensure the highest standards of quality and customer care".

The shutdown came after several major lawsuits against adware vendors had been launched.

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Phorm partnered with ISPs Oi, Telefonica in Brazil, Romtelecom in Romania, The company's proposed advertising system, called Webwise, was a behavioral targeting service (similar to Nebu Ad) that used deep packet inspection to examine traffic.

Phorm said that the data collected would be anonymous and would not be used to identify users, and that their service would include protection against phishing (fraudulent collection of users' personal information).

Nonetheless, World Wide Web creator Tim Berners-Lee and others spoke out against Phorm for tracking users' browsing habits, and the ISP BT Group was criticised for running secret trials of the service.

The service, which would have been marketed to end-users as "Webwise", (in 2009 the BBC took legal advice over the trade mark Webwise), would work by categorising user interests and matching them with advertisers who wish to target that type of user.

"As you browse we're able to categorise all of your Internet actions", said Phorm COO Virasb Vahidi. Phorm's system, like many websites, uses HTTP cookies (small pieces of text) to store user settings.

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