Consumer Groups, Lawmakers Scrutinize RFID Systems
Consumer groups are no longer alone in demanding guarantees that radio frequency identification tags will not compromise the privacy rights of individuals. Lawmakers are also sending up red flags to businesses in the form of legislation.
The latest RFID-targeted bill was introduced late last month in California by state Sen. Debra Bowen. The proposed legislation would apply to any business using an RFID system capable of tracking products and people.
Those companies would be required to tell customers that an RFID system is in use and get permission before tracking and collecting information. The bill also requires businesses to detach or destroy product-attached RFID tags before the customer leaves the store.
Bowen said her intent is not to prohibit the use of RFID, a fast-growing technology that proponents say will save corporations billions of dollars in the cost of managing and moving inventory through supply chains.
"We don't want to interfere with what has potential for major improvements," Bowen said. "At the same time, we want to deal with the concerns of retail consumers that their shoes don't report on them every time they go through a door with RFID readers."
Despite the concerns of lawmakers and consumers, experts point out that RFID technology is several years away from use within a retail store.
For example, shelf-attached readers, the transmitters used to read the tags and move product information to a central database, are not yet capable of tracking each in-store item. In addition, standards haven't been developed for storing information on the tags, and software has yet to be developed to manage such huge amounts of information that would change constantly as consumers pulled items off store shelves.
"I fully back consumer rights, but consumer rights have to have a reason," Erik Michielsen, analyst for ABI Research, said. "At this point there's not a whole lot out there in terms of technology."
Being early with legislation, however, is exactly where Bowen wants to be, arguing that businesses will be better off if they know the rules before deploying the technology.
"I felt it was best to get ahead of the curve and build these standards before we had a lot of investment made," Bowen said.
Most businesses today are focused on using RFID technology to track pallets and cases of goods as they move through warehouses and head to retail stores. Most of the work is being driven by a mandate from the world's largest retailer Wal-Mart Stores, which wants its top suppliers shipping to certain RFID-ready warehouses in 2005.
The U.S. Department of Defense has a similar mandate, and retailer Target Corp. in late February asked its top suppliers to begin using RFID for shipments heading to several distribution facilities by spring 2005.
Despite the push from such large organizations, AMR Research Inc. said it expects the RFID market to remain in the pilot phase, meaning widespread testing and prototyping, into 2005. The market research firm expects wide-scale deployment at the pallet and case level between 2005 and 2009. Item-level tagging, the area consumer protection groups are most concerned with, is not expected to see substantial growth across businesses until 2009 to 2013.
Despite the lead-time, experts agree that now is the time for businesses to sit down with state and federal lawmakers and consumer groups to satisfy everyone's concerns for protecting privacy.
"What's required is a reasonable, rational approach to risk assessment," Jeff Woods, analyst for Gartner Inc., said. "We need to balance the risk of privacy invasion versus the advantages that commercial users are going to get, and also the benefits that individual consumers are going to get."
For consumers, the immediate benefits are expected to include, for example, less chance of a store running out of their favorite shirts or pants in the size they want. For businesses, it means cutting costs through better tracking of products, which means fewer goods stored in warehouses.
For vendors, ABI expects the market for RFID hardware, software and integration services to exceed $7 billion by 2008.
But to reap the most benefits, all sides will need to compromise on a solution.
"We believe that RFID technology has enormous potential to save money in the global supply chain and provide substantial consumer benefit," said Jack Grasso, spokesman for EPC Global Inc., a joint venture of EAN International and the Uniform Code Council that's working to define RFID standards.
"We know that if we don't go about this in a responsible way, (the technology) will be sub-optimized when it's put into deployment," Grasso said.
To date, there is no one organization taking the lead in representing businesses on the RFID issue in California, or on the national level. Indeed, some retailers that have tried to use the tags in stores have been forced to back away from their projects, because of protests from consumer rights groups.
Italian clothing manufacturer Benetton, for example, suspended plans last year to use RFID tags from Philips Semiconductor on Benetton's Sisley clothing line.
More recently, German retail giant Metro Group earlier this month stop putting electronic tags inside customer loyalty cards, following protests by privacy advocates who said the cards could be used to track consumers as they shop.
Bowen's proposal to notify consumers that RFID technology was being used in a store would be easy to implement, Woods said. But requiring businesses to get the consent of every customer before tracking and collecting any information would be far more difficult.
"It depends what is meant by acknowledgement and by collecting information," Woods said. "If it's broadly interpreted, meaning any movement of data, then that could be very cumbersome. If it's narrowly interpreted to be a specific type of data, then it would probably be a much more workable regulation."
Those issues, however, are exactly what Bowen hopes to discuss with businesses.
"I look forward to hearing from people who raise issues that I haven't thought of yet," Bowen said.
With so much at stake, it would be wise for all sides -- government, consumer groups and businesses -- to start talking as soon as possible.
"It's really, at the end of the day, a balancing act," Woods said. "How much, or how little, of the technology are we going to want, versus, how much benefit are we going to get out of it?"
This story courtesy of TechWeb.