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Setting the policy to Enabled lets Google ChromeOS bypass any proxy for captive portal authentication. These authentication webpages, starting from the captive portal sign-in page until Chrome detects a successful internet connection, open in a separate window, ignoring all policy settings and restrictions for the current user. This policy only takes effect if a proxy is set up (by policy, extension, or the user in chrome://settings).
Setting the policy to Disabled or leaving it unset means any captive portal authentication pages are shown in a (regular) new browser tab, using the current user's proxy settings.