Epic Marketplace and the Federal Trade Commission reached an agreement over the agency’s charges that the company used “history sniffing” technology to illegally gather data from millions of consumers.

Epic, an advertising company that has a presence on 45,000 Web sites, placed a cookie on visiting consumers’ computers to store information about the sites they visited. Epic claimed in its privacy policy that it would collect information from consumers about their visits to sites only within its network. But the company then secretly collected information about consumers for behavioral advertising purposes – “sniffing” their browsers to see what other sites they visited from March 2010 to August 2011, the FTC alleged.

Data on sensitive financial and health issues like fertility, disability insurance, incontinence, debt relief, menopause, credit repair, and bankruptcy was collected, according to the agency, and Epic used the information to categorize consumers based on their site visits. Consumer “interest segments” were created with topics like “incontinence,” and those within the segments were then served targeted ads.

The history sniffing itself does not violate Section 5 of the FTC Act, the agency said. Instead, the unfair and deceptive practice occurred when the defendant failed to inform consumers in its privacy policy about the use of the technology.

Under the terms of the proposed consent agreement, Epic is banned from future use of such technology and must destroy any information gathered unlawfully. Future misrepresentations about data privacy and confidentiality are also prohibited. Epic did not admit to any wrongdoing in the settlement.

To read the complaint and the proposed consent agreement, click here.

Why it matters: “Consumers searching the Internet shouldn’t have to worry about whether someone is going to go sniffing through the sensitive, personal details of their browsing history without their knowledge,” FTC Chairman Jon Leibowitz said in a news release. “This type of unscrupulous behavior undermines consumers’ confidence, and we won’t tolerate it.”