July 22 (Reuters) - Google is planning to keep

third-party cookies in its Chrome browser, it said on Monday,

after years of pledging to phase out the tiny packets of code

meant to track users on the internet.

The major reversal follows concerns from advertisers - the

company's biggest source of income - saying the loss of cookies

in the world's most popular browser will limit their ability to

collect information for personalizing ads, making them dependent

on Google's user databases.

The UK's Competition and Markets Authority had also

scrutinized Google's plan over concerns it would impede

competition in digital advertising.

"Instead of deprecating third-party cookies, we would

introduce a new experience in Chrome that lets people make an

informed choice that applies across their web browsing, and

they'd be able to adjust that choice at any time," Anthony

Chavez, vice president of the Google-backed Privacy Sandbox

initiative, said in a blog post.

Since 2019, the Alphabet unit has been working on

the Privacy Sandbox initiative aimed at enhancing online privacy

while supporting digital businesses, with a key goal being the

phase-out of third-party cookies.

Cookies are packets of information that allow websites and

advertisers to identify individual web surfers and track their

browsing habits, but they can also be used for unwanted

surveillance.

In the European Union, the use of cookies is governed by the

General Data Protection Regulation (GDPR), which stipulates that

publishers secure explicit consent from users to store their

cookies. Major browsers also give the option to delete cookies

on command.

Chavez said Google was working with regulators such as the

UK's CMA and Information Commissioner's Office as well as

publishers and privacy groups on the new approach, while

continuing to invest in the Privacy Sandbox program.

The announcement drew mixed reactions.

"Advertising stakeholders will no longer have to prepare to

quit third-party cookies cold turkey," eMarketer analyst Evelyn

Mitchell-Wolf said in a statement.

Lena Cohen, staff technologist at the Electronic Frontier

Foundation, said cookies can lead to consumer harm, for instance

predatory ads that target vulnerable groups. "Google's decision

to continue allowing third-party cookies, despite other major

browsers blocking them for years, is a direct consequence of

their advertising-driven business model," Cohen said in a

statement.

(Reporting by Yuvraj Malik and Jeffrey Dastin in San Francisco;

Editing by Devika Syamnath)