Google Analytics illegal?

From the latest DPD Email via my wife:

Data protection officials in Germany are investigating whether Google's web traffic management system Google Analytics breaches data protection law. Around 13% of German websites use the free service to assist them in the creation of their sites and the management of advertising, according to one research agency. Concerns are centred on the use of the system without web users' consent. A spokesperson from Google has said that Google is completely confident of its compliance on the basis that it requires all websites to update their privacy policies so that the use of Analytics is fully disclosed. A determination is awaited. The German officials are considering imposing fines of up to €50,000 for sites' use of the service.