The retention of traffic (and location) data for law enforcement purposes is an issue that has been discussed within the European Union for several years. After months of legal uncertainty as to whether the legal instrument regulating this issue should be based on the first or the third pillar, the data retention directive was finally adopted on the 15th of March 2006. The directive prescribes the kind of data that has to be retained by the providers of publicly available electronic communications services or of public communications networks and the retention period. In this article we examine critically the choices made by the European Institutions, thereby referring to existing national legislations on traffic data retention and assessing the impact on the industry. In the last chapter we evaluate the compatibility of data retention in the electronic communications sector with Article 8 ECHR.