The Federal Trade Commission said today it has reached a settlement with online advertising company Chitika, that ends the company’s allegedly deceptive practice of tracking peoples’ activities even after they opted out of online tracking on Chitika’s website.

The FTC alleged that in its privacy policy the company says that it collects data about consumers’ preferences, but allows people to opt out of having cookies placed on their browsers and receiving targeted ads. The privacy policy includes an “Opt-Out” button. Consumers who click on it activate a message that states, “You are currently opted out.”

According to the FTC complaint, from at least May 2008 through February 2010, Chitika’s opt-out lasted only 10 days. After that time, Chitika placed tracking cookies on browsers of consumers who had opted out and targeted ads to them again. The FTC charged Chitika’s claims about its opt-out mechanism were deceptive and violated federal law.

The settlement blocks Chitika from making deceptive statements about about consumers and the extent to which consumers can control the collection, use or sharing of their data. Every targeted ad must include a hyperlink that takes users’ to an opt-out options that allows them to opt out for at least five years.

It also requires that Chitika destroy all identifiable user information collected when the defective opt out was in place. In addition, the settlement requires that Chitika alert people who previously tried to opt out that their attempt was not effective, and they should opt out again to avoid targeted ads.