People surfing European websites will be able to turn off the cookies used to spy on their Internet habits under rules hammered out by the region's online advertisers, an industry body said on Thursday.

The European web advertising industry's self-regulation pledge comes a month before a European Union directive takes effect, requiring websites to obtain a user's consent before installing a tracking cookie.

It will change significantly how the Internet will look and how people interact with ads, said Kimon Zorbas, vice president of Brussels-based Internet Advertising Bureau Europe, the industry group that developed the new rules.

Web companies monitor people's online activities through tracking software called cookies, so they can send targeted advertising based on their potential interests or previous site visits -- a process called behavioral advertising.

Under the agreement, web ads will carry a clickable icon labeled AdChoices that will let users change their privacy settings so they are no longer profiled for advertising purposes.

Companies including Yahoo, Microsoft, Google and AOL are among those which have have agreed to use the icons on their online display ads in Europe.

Policymakers in the EU and elsewhere have been concerned users have little control over the use of cookies to track their activity -- and are often unaware it is taking place.

Those involved in developing the code of conduct say it is not a response to the EU directive, but was inspired by a similar self-regulatory movement in the United States.

Zorbas said the industry body had made adjustments to the code based on feedback from the European Commission.

Jonathan Todd, spokesman for Neelie Kroes, European Commissioner for the Digital Agenda, said the Commission has been in close contact with the groups developing the code.

There will be new legally binding obligations on websites as of the 25th of May, Todd told Reuters.

If this code ensures that they are fully compliant with their legal obligations under the new e-privacy directive, all well and good.

(Reporting by Eva Dou; Editing by Geert De Clercq and Sophie Hares)

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