An EU Internal Market Report, released on Monday, criticised "advertising techniques, whereby advertisers pose as consumers on internet forums, or abuse data privacy to target individual consumers' interests".
It proposed "behavioural advertisement" warnings and policing by forum moderators.
The report stated that, while the Unfair Commercial Practices Directive (UCPD) of 2005 did provide an essential legal framework for combating misleading and aggressive advertising, several difficulties were already apparent, notably regarding the new, more pervasive forms of advertising arising from the development of new advertising practices and technologies on the internet.
The report voiced concern about "the routine use of behavioural advertising and the development of intrusive advertising practices", including third parties who read private emails or use social networks and geolocation to tailor advertising to individual consumers' interests.
It said that much online behavioural advertising constituted "an attack on the protection of privacy when it involves tracking individuals", for instance through cookies or profiling.
The report called for the insertion, "as soon as possible", of "the clearly readable words 'behavioural advertisement' into the relevant online advertisements, along with a window containing a basic explanation of this practice".
It also called on member states "to ensure that different levels of data collection are kept wholly separate" and stresses that consumers must receive clear, accessible and comprehensive information about how their data are collected and used.
The report added that this information should be kept and used "only by explicit agreement by the consumer".
The report called on the European Commission and member states to ensure that the UCPD, which does not yet cover the development of so-called "hidden" internet advertising, is properly applied.
"Hidden advertising", which the report suggested takes place in forums where consumers post comments to one another about goods or services (e.g. recommendations for hotels), might not only mislead consumers, but could also ruin a company's reputation with just one click.
The report concluded that EU member states should "encourage the emergence of forum observers/moderators who are alert to the dangers of hidden advertising" along with running information campaigns to warn consumers of such "hidden" forms of advertising.
To improve consumer safety and transparency, the report called on the Commission to develop an EU website labelling system, modelled on the European Privacy Seal, that certifies a site's standard of data protection and encourages the use of EU-wide simultaneous web site "sweeps" carried out by member states to rid the internet of unfair advertising practices.
To protect vulnerable consumers such as children, the Commission was urged to develop an EU advertising literacy programme modelled on the UK's "Media Smart" initiative.
The report was approved in committee with 30 votes in favour, one against and two abstentions, and is scheduled for a plenary vote in December.