US pushes for RFID laws

A California state lawmaker introduced a bill on Tuesday meant to address consumer privacy concerns related to the commercial use of radio frequency identification technology.

Senate Bill 1834 would apply to any business or state government agency using radio frequency identification (RFID) systems to track merchandise or people - an activity that's on the rise. According to people familiar with the technology, state Senator Debra Bowen is the first legislator in the nation to introduce a bill that seeks to govern the use of RFID, a technology that has sparked controversy since retailers began experiments last year.

The bill proposes that businesses and agencies be required to notify people that they're using an RFID system that can track and collect information about them. It would also require consumers to give express consent before businesses or agencies could track and collect information about them via RFID. Lastly, the legislation requires retailers to detach or destroy RFID "tags" on merchandize before consumers leave the store with it.

"The privacy impact of letting manufacturers and stores put RFID chips in the clothes, groceries and everything else you buy is enormous," Bowen said in a statement. "There's no reason to let RFID sneak up on us when we have the ability to put some privacy protections in place before the genie's out of the bottle."

Privacy concerns over RFID began to surface last year when retailers, including Wal-Mart Stores and British grocery chain Tesco, began testing the technology in stores, often in trials that involved unwitting consumers. The so-called smart-shelf trials were designed to help retailers monitor inventory and detect theft, but consumer advocates fear such systems could lead to surveillance on an unprecedented scale. Facing criticism, Wal-Mart discontinued the in-store testing and said it planned to use RFID to improve its distribution process instead.

RFID has existed for years, but many industries are finding new commercial uses for it. Led by Wal-Mart, Gillette and Procter & Gamble, companies are starting to use the technology in hopes of reducing inventory errors and keeping stores well stocked. In addition, the US military plans to use RFID to keep supplies flowing to troops and military bases. The technology works by placing special microchips on all sorts of items, enabling them to automatically broadcast their whereabouts through radio signals that talk to computer networks.

The roster of high-tech companies developing hardware and software specialised for RFID includes Intel, Microsoft, Oracle, SAP and Sun Microsystems, and is rapidly growing. Many hope to cash in on what analysts say will be a multibillion-dollar market within the next five years.

Consumer advocate Katherine Albrecht lauded Bowen's bill, noting that it could have a national impact because so many companies do business in California. "It's very disturbing, this idea that you could be wearing a homing device of sorts and have no way of protecting yourself or even knowing about it," Albrecht said. "[This bill] is long overdue."

Albrecht is the head of a nonprofit group called Consumers Against Supermarket Privacy Invasion and Numbering.

Jack Grasso, a spokesman for the pro-RFID group EPCglobal, said his group hasn't yet taken a position on the bill but that privacy was top priority among EPCglobal members, which include many of the major names in retail, consumer goods and high-tech. "We believe this technology could be of enormous benefit not just to retailers but to consumers across the globe," he said.

Retailers expect to save billions of dollars by using RFID systems to cut inventory costs. RFID advocates say those savings could be passed down to consumers in the form of lower prices and warn that unwise RFID legislation could interfere with such benefits.

EPCglobal, which is a branch of the Uniform Code Council - the group that administers bar codes, has formed a lobbying group with the help of Procter & Gamble, Gillette, the National Retail Federation and others, Grasso said. The group seeks to influence public policy and has already met with members of Congress, he said.

Bowen, who chairs the Senate Subcommittee on New Technologies, has been an active sponsor of technology-related legislation, introducing bills that would regulate spam, face recognition technology and consumer data collection. She held two hearings on RFID technology and privacy last year where Albrecht and others called for RFID legislation.

Alorie Gilbert writes for CNET News.com