RFID Implementation Must Ensure Consumer Privacy – FTC’s Beales
This article was originally published in The Rose Sheet
Executive Summary
Consumer privacy concerns must be addressed by retailers and manufacturers as they implement radio frequency identification technology, Federal Trade Commission Bureau of Consumer Protection Director J. Howard Beales said during an FTC RFID workshop June 21 in Washington, D.C
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Consumer privacy concerns must be addressed by retailers and manufacturers as they implement radio frequency identification technology, Federal Trade Commission Bureau of Consumer Protection Director J. Howard Beales said during an FTC RFID workshop June 21 in Washington, D.C. For companies using RFID, "the common objective should be transparency," Beales asserted. "There could not be a clearer need for transparency than when a new technology is deployed in new and different ways," he said, adding that educating consumers about RFID will help allay reservations they might have. RFID enables the tracking of items from manufacture to point of sale through microchips containing electronic product codes that are carried on labels. The system uses radio waves to identify items within cases and palettes out of the line of sight. The technology will roll out to some of the largest retail outlets in the U.S.; Wal-Mart will begin phasing in RFID next year, and Target also announced it will adopt the technology. RFID is expected to improve supply chain efficiency, eliminate excess inventory and ensure that products are available on shelves. However, privacy advocates are concerned it could be used for purposes other than tracking products. "If the technology is implemented irresponsibly, it could be a tool for consumer profiling and tracking," Privacy Rights Clearinghouse founder and Director Beth Givens warned. Beales maintained that information collected by companies from RFID "needs to be secured." Pointing out RFID is "not just a business issue," he said FTC will monitor the design and deployment of RFID to ensure consumer privacy. Negative associations with RFID have appeared in the press, and a survey conducted by Cap Gemini Ernst & Young found that consumers familiar with the technology are concerned it could be used for data mining or direct marketing (1 (Also see "Consumer Opinion Of RFID Reviewed By Retail Industry" - HBW Insight, 19 Jan, 2004.), p. 13). Procter & Gamble is taking steps to preserve privacy and educate consumers about the technology, according to P&G Global Privacy Executive Sandra Hughes. The exec noted that RFID will be implemented in accordance with the company's privacy policies. The firm said it would adopt RFID to improve supply chain efficiencies last year (2 (Also see "P&G Has Positive Outlook On RFID Initiative, Seeks Supply Chain Efficiency" - HBW Insight, 3 Nov, 2003.), p. 8). P&G was an early advocate of RFID, co-funding with Gillette a research center at the Massachusetts Institute of Technology to develop an alternative to the universal product code in 1999 (3 (Also see "P&G, Gillette First Sponsors Of MIT Auto-ID Research Center" - HBW Insight, 11 Oct, 1999.), p. 6). While privacy issues were highlighted as a potential downside to RFID, panelists also emphasized the technology's advantages. "In terms of leveraging RFID and its benefits, the full potential across the supply chain is enormous," Wal-Mart Manager of RFID Strategy Simon Langford noted. Wal-Mart is requiring its top 100 suppliers to utilize RFID by January. By late 2005 or early 2006, the technology will be used in 12 Wal-Mart distribution centers and up to 600 stores, Langford said. Britt Wood, Retail Industry Leaders Association Senior VP of Industry Relations, also cited supply chain efficiency as a benefit of RFID, noting "There is a 6-10% waste found through lack of visibility and poor visibility in the supply chain, and this is an issue where we believe that tagging at the case and palette level will give us the opportunity to enhance our visibility and cut into this waste." In addition to privacy, another challenge in adopting RFID is cost, according to Christopher Boone, a program manager with information technology research firm IDC. The price of individual tags remains relatively high, averaging $.20-$.40 for labels, Wood said, adding that the readers can cost $500-$1,000. Other costs will include software and staff trained to use the system, Wood noted. Participants in the workshop agreed RFID's benefits will not be seen immediately. "We're at the beginning of a marathon...it's going to be painful for a while until we get going and start driving the benefits and tipping the scale," Accenture Technology Innovation Managing Partner Lyle Ginsburg opined. |