In a warning letter sent late last week, the EC said that the UK had failed to adequately enact European privacy laws and, as a result, has two months to resolve the situation.
Whilst the UK has enacted various legislation such as the Data Protection Act, the EC is concerned that the laws do not fully comply with the European E-Privacy Directive and the Data Protection Directive.
What appears to have triggered the EC warning is BT's trial of a behavioural advertising system called Phorm in 2006 and 2007.
At the time, the trials drew expressions of outrage amongst the population and users of BT's online services and, as a result, BT quietly shelved its plans for Phorm.
There appears to have been a lot going on behind the scenes, however, as despite BT's apparent shelving of Phorm, it seems that the behavioural advertising trial triggered an EC investigation into the technology and, more specifically, how the trial was allowed to progress in the UK under current privacy legislation.
In a press statement, EC Information Commissioner Viviane Reding said that the aim now is to bring about a change in UK privacy law.
"People's privacy and the integrity of their personal data in the digital world is not only an important matter, it is a fundamental right, protected by European law", she said.
"I therefore call on the UK authorities to change their national laws to ensure that British citizens fully benefit from the safeguards set out in EU law concerning confidentiality of electronic communications."
Along with an apparent failure to look after its citizen's privacy, the EC has also criticised the UK's Regulation of Investigatory Powers Act (RIPA) on the basis that it does not require that people give informed and specific consent to their communications being intercepted for purposes such as behavioural advertising.
BT will be breathing a sigh of relief over the affair, Infosecurity notes, as some quarters had suggested the telecoms giant might be prosecuted by the EC for trialling Phorm.
A prosecution does not now seem likely, but the resultant saga with the EC will do BT no favours in UK government circles if, as seems likely, a change in the law is now required.