'Spy Chip' Critics Cite Future Consumer Implications

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CINCINNATI (AdAge.com) -- The planned rollout of a radio-frequency identification system to track promotional displays in 5,000 Walgreens stores is raising objections from privacy advocates, who cite patents as proof the system could eventually track consumers using RFID chips in loyalty cards.
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Tracking promotions
In what appears to be the largest marketing application yet of RFID, the system from privately held Goliath Solutions at Walgreens electronically tracks when, how long and where displays are placed in stores. It allows the 15 package-goods marketers who have initially signed on to the program to track results of promotions by store or demographic cluster.

It also lets participating manufacturers send representatives to stores that haven’t put up displays and time local, regional or national advertising according to when displays are in place. The system doesn’t involve putting RFID chips on products consumers take home.

'Spy chips'
RFID chips have been controversial in consumer applications, with opponents referring to them as "spy chips" and contending the technology could be used by marketers, stalkers or the government to spy on consumers. But the Walgreens installation is for store and supply-chain use only and would not involve placing chips on packages used by consumers.

But the privacy group Consumers Against Supermarket Privacy Invasion and Numbering cites two patents and two pending applications by Goliath that envision extending the system to track individual consumers in stores and target ads to them at home by using RFID chips embedded in loyalty cards.

One of the patents, granted in October, for example, outlines using RFID readers to count how many consumers are exposed to a particular display or to identify consumers who “closely identified a display for a predetermined amount of time” by reading their loyalty cards. The patent envisions consumers flashing their loyalty cards in the vicinity of the displays or, it adds: “The card could be read in a shopper’s purse.” The patent also covers gathering data about which displays individual consumers frequent in retailer databases to provide “personalized incentives” and “focus subsequent advertising material, such as direct mail.”

'Never say never'
“I couldn’t speculate on the future and I could never say never about anything,” a Walgreens spokesman said. But he added: “All we’re doing at this point is looking at using this technology to get better performance out of our displays in the stores, and that’s it.” Walgreens doesn’t have loyalty cards, he said.

“We are absolutely focused on not impacting consumer privacy,” said Robert Michelson, CEO of Goliath.

In a statement, he said Goliath is not using the system in Walgreens to track consumers and that the RFID tags there are attached to displays and signs only, not on any products. “Consumer privacy is not an issue in that displays and signs are part of the store. Consumers do not purchase them.”

He did not respond to questions regarding future plans to use the Goliath system to track consumers in stores using RFID-enabled loyalty cards.

Liz McIntyre, communications director of CASPIAN and co-author of the recently published anti-RFID book “Spychips,” said she knows of no retailers that currently use RFID chips in loyalty cards, a practice that was fraught with controversy for the one retailer caught trying it. German retailer Metro recalled its frequent-shopper cards in 2004 after CASPIAN founder Katherine Albrecht discovered an RFID chip in a sample card given to her by the chain.

Slippery slope
But Ms. McIntyre said technology suppliers like Goliath and retailers like Walgreens are likely to try to maximize returns from investment in infrastructure by expanding use of RFID tracking to consumers. “Today, they may just be monitoring displays,” she said. “Tomorrow, they could be monitoring individual shoppers and siphoning information from them without their knowledge or consent.”

She noted promotional material from Goliath touts its system’s invisibility to shoppers and store personnel, citing an ability to track RFID signals from “well beyond 30 feet” and to embed readers unobtrusively in light fixtures or above ceiling tiles.

“Once RFID crosses the line from the warehouse to the store floor, that’s where we have an objection,” Ms. McIntyre said, adding that the group believes any use of RFID in stores should be disclosed to consumers. But she said the group hasn’t decided yet what if any action to take regarding the Walgreens program.

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