RFID Tags – Overcoming The Fears Of Big Brother

An electronic revolution set to transform retail stock control and customer profiling has sparked consumer controversy with fears that information gathering may not stop at the shop door.

The debate over the use of radio tagging as a successor to barcodes to electronically track retail goods has intensified in both the UK and the US since some major supermarkets introduced pilot tag schemes.

The benefits to retailers could be enormous. Tags offer increased operating efficiency and reductions in shrinkage – it will be harder for goods to "walk". But privacy campaigners are concerned tags could be used for more sinister purposes, such as monitoring the whereabouts of customers and building profiles of customers' shopping preferences – without their knowledge.

Radio Frequency Identification (RFID), tiny devices that can be fitted to any goods, comprise a microchip and an antenna, capable of transmitting messages to "readers". The readers use the message in accordance with their programmers' instructions. Generally, readers can only be a couple of metres or so away from the tags, although some experts believe more powerful versions capable of reading information at greater distances can be built. Unlike barcodes, RFID tags do not require line-of-sight reading, which means a shopping trolley full of RFID-tagged goods could be read in a second.

Another major advantage of RFID tags over barcodes is that each item will have its own code rather than a generic code which relates to a specific product line. This means retailers can trace and recall certain batches of goods quickly should there be any subsequent concern over their quality or safety.

At present, the tags are too expensive to use on low-cost items, although their cost will fall over time.

In July, Tesco trialed RFID technology in its Cambridge store on Gillette Mach 3 razor blades, emphasising that this was to garner stock information. However, Tesco had noticed that the blades were particularly susceptible to theft. They used the RFID tagging technology to trigger a CCTV camera picture as the customer picked a packet of razor blades off the shelf and then compared this with a second picture taken at the checkout. The store manager was able to identify possible shoplifters and present the pictures to the police. The trial concluded in August and Tesco's verdict on its success is awaited. Quite what happens when a customer decides against the purchase before reaching the checkout and puts the product back on to a different shelf is unclear.

In the Sandhurst branch of Tescos the DVD section made use of "intelligent shelving". When a customer picked up an RFID-tagged DVD from the shelf, the shelf sensed this and immediately sent a message to the main stock computer to replenish the shelf stock.

In one store in Germany, retailers Metro AG have taken this a step further. A combination of loyalty cards and "smart" shopping trolleys monitor the customers' shopping habits whilst they shop and use the information immediately to highlight to customers other products or offers which they may find appealing.

In the US, Wal-Mart has run a pilot scheme and is now introducing requirements for its suppliers to attach RFID tags to palettes and cases of goods (although not on the goods themselves), for use in warehouses and distribution centres.

Without doubt, RFID tags can provide huge economic benefits for businesses. For example:

• The technology can be used to track batches of products right through the supply chain. This information will be invaluable in enabling retailers to keep inventory levels low and prevent valuable warehouse space being cluttered with excess stock.

• The "smart shelf" technology captures the movement of goods and automatically triggers requests for a fresh supply before goods go through the checkout.

• There should be a reduction in the amount of time taken at the checkout by scanning a trolley full of goods instantaneously, helping to restrict queues.

• RFID tags also provide stores with the opportunity to prevent shoplifting.

It is easy to see why suppliers are increasingly keen to introduce RFID tags to the marketplace and customers might share this enthusiasm if costs saved by the suppliers and retailers were passed on to them in the form of cheaper products.

Privacy groups, however, have raised a number of legitimate concerns over the use of RFID tags, which suppliers, retailers and Government need to address before tags are accepted by the public, such as:

• The Metro AG example shows how the technology can be used to build profiles of customers' shopping habits as they shop. What is done to protect this data from being mis-used or being passed on to third parties against the wishes of the customer is key.

• The technology enables products to be tracked, but the customer may object to the tracking continuing once he or she has left the store. How can the customer be assured that their home is not full of tracking devices, enabling their habits to be monitored for various market research and other purposes?

• It is not inconceivable that criminals could use RFID tag readers to scan properties (e.g. a house or a car) for RFID tags to see whether the property contained any valuable goods before deciding whether or not to break in.

Tom Watson, a Labour MP, has submitted a motion for a parliamentary debate this Autumn on the regulation of RFID tags, with a view to introducing legislation to address these concerns. Without these, he warns that the tags are "open to abuse by unscrupulous retailers".

Although existing legislation could be used to deal with some aspects of RFID tags (such as the Data Protection Act 1998 and the E-Privacy Directive), we may need further legislation from the UK or Europe to deal with specific issues. In the meantime, suppliers and retailers thinking of introducing RFID tags should consider:

• Reducing customer scepticism by promoting a public awareness campaign explaining what RFID tags are, and how they are (and as importantly, are not) to be used. This could be promoted alongside an RFID Tag Policy, which provides the customers with all of the information they require.

• The use of RFID tags to build a customer profile can be likened to a customer loyalty card scheme. As with loyalty cards, the consent of a customer must first be obtained before such information can be collected and processed. Therefore, the customer will need to sign up to a Fair Collection Notice explaining who is collecting the data, the purposes for which the tags are to be used, which third parties the data will be disclosed to, and who the customer should contact if they have any issues regarding the data. Where no consent is obtained, there can be no monitoring for these purposes.

• If the information is being stored to build a customer profile, the retailer or supplier must observe their obligations under the Data Protection Act 1998, such as keeping the data secure, accurate, relevant and up to date.

• If the customer does not want the tracking to continue once they have left the store, then there should be an option to disable the RFID tags at the checkout by erasing the data on it. Philips announced that it had added an "off switch" to its RFID tags. Retailers could simply disable tags as a matter of course, having no further legitimate interest in monitoring what happens to the products once they leave the store.

• Where the customer consents to tracking continuing outside the store, the products carrying RFID tags could be highlighted on the receipt so that the customer can identify them easily.

• The Information Commissioner has already produced guidelines on the use of CCTV for the prevention of crime. Retailers using RFID tags for similar purposes to the Tesco / Gillette example should ensure that they comply with this guidance.

• Arguably, the RFID tags should be placed on the product packaging, rather than the products themselves so that they are obvious to the customer. The customer could then to dispose of the tags easily. However, this may affect the usefulness of the tags in avoiding shrinkage, if shoplifters find it easy to remove the tags before stealing the products.

If RFID tags are to assist suppliers and retailers, the doubts of customers must first be removed and the advice given here may go some way to dispelling such doubts.