The hearing, presided over by state Sen. Debra Bowen, focused on an emerging area of technology that's known as radio frequency identification (RFID). Retailers and manufacturers in the United States and Europe, including Wal-Mart Stores, have begun testing RFID systems, which use millions of special sensors to automatically detect the movement of merchandise in stores and monitor inventory in warehouses.
Proponents hail the technology as the next-generation bar code, allowing merchants and manufacturers to operate more efficiently and cut down on theft.
Privacy activists worry, however, that the unchecked use of RFID could end upby allowing retailers to gather unprecedented amounts of information about activity in their stores and link it to customer information databases. They also worry about the possibility that companies, governments and would-be thieves might be able to monitor people's personal belongings, embedded with tiny RFID microchips, after they are purchased.
"How would you like it if, for instance, one day you realized your underwear was reporting on your whereabouts?" said Bowen, posing a hypothetical RFID scenario.
One witness at Monday's hearing said that failing to impose conditions on the use of RFID technology could lead to a world not unlike the fictional society portrayed in Steven Spielberg's science-fiction thriller "Minority Report." In that movie, set in 2054, iris scanning technology allows billboards to recognize people and display personalized ads that called out their names. It also allows law enforcement authorities to track people's whereabouts.
"There has been scant scrutiny by policymakers on RFID and pervasive computing," said Beth Givens, director of the Privacy Rights Clearinghouse, a nonprofit consumer advocacy group based in San Diego. "This hearing is an important first step."
Givens urged Bowen to lead a study of RFID and its "profound privacy and civil liberties implications." She suggested that RFID be subjected to a set of fair-use guidelines. For instance, companies should be required to inform consumers about products containing RFID chips by clearly labeling them, Givens said. Consumers should also have the right to permanently disable the chips upon purchasing such goods, she said. And companies ought to provide consumers with the information collected about them via RFID tracking systems upon consumers' request, Givens added.
Other witnesses, including a representative from the consumer privacy group Electronic Frontier Foundation and a researcher from University of California at Los Angeles, also called for limits on the use of RFID and a technology assessment by policymakers. "It's possible to set up these systems so that there is no privacy anywhere," said Greg Pottie, an electrical engineering professor at UCLA.
"The time is right for an assessment of this technology," said Pottie, who is involved in the Center for Embedded Networked Sensing, a research project based at UCLA that's funded by the National Science Foundation.
Katherine Albrecht, a vehement opponent of RFID technology, went further and suggested a moratorium on the commercial use of RFID technology until legal guidelines are set. Albrecht, who also testified Monday, is the head of Consumers Against Supermarket Privacy Invasion and Numbering. "I would personally like to see (RFID) go away," she said.
Dan Mullen, head of the trade group Association for Automatic Identification and Data Capture Technologies, tried to temper the discussion, testifying that mass adoption of RFID chips for tracking merchandise in stores has yet to take off and may never do so. "There has to be a business case to put an RFID chip on a can of Coke," Mullen said. "When it comes down to it, there may not be a business case for anyone to do that."
Bowen said that the introduction of legislation to control the use of RFID is "possible," but that she's not at the bill stage yet. Even if she were to draft a bill, it would not be her goal to outlaw RFID, she said. Bowen herself uses a special pet-tracking chip that uses RFID to keep tabs on her cats.
"Is the goal of this hearing is to restrict the use of the technology? No," Bowen said. "It's not our goal to create legislation that says this technology could never be used. It's to gain a better understanding."
Bowen, who is the chair of the legislative subcommittee on new technologies, has been on the forefront of the. An outspoken advocate of consumer privacy, Bowen also helped draft and introduce bills that would regulate face recognition technology, consumer data collected by cable and satellite television companies, and shopper loyalty cards used in grocery chains.
Policymakers in Britain are also starting to ponder the privacy implications of RFID. A member of Britain's Parliament recently submitted a motion for debate on the regulation of RFID devices when the government returns from its summer recess next month.
Major retailers are just beginning to experiment with RFID. Tesco, a United Kingdom-based supermarket chain, has begun sellingembedded in them in a trial run of the technology at its Cambridge store, according to reports. Wal-Mart had undertaken a similar test in a Boston-area store but recently decided to . Italian clothier how it wants to use RFID chips.
Instead of introducing RFID to its store shelves, Wal-Mart is urging its top 100 suppliers to start attaching RFID chips to shipments of merchandize they send to the retailer by 2005. And by the end of 2006, the company wants the rest of its suppliers, about 25,000, to begin doing the same, a Wal-Mart representative said. Wal-Mart says the chips will be used only on paletts and cases, not on the goods themselves. It will confine its use of the chips, for now, to warehouses and distribution centers, keeping them out of its stores and away from consumers.
The retail giant will meet with its suppliers in the fourth quarter to discuss implementation of RFID technology and the issues surrounding the use of the technology.
Though the timetable set by Wal-Mart to install RFID technology may be difficult to keep, it isn't likely a voluntary assignment. Suppliers may have a number of reasons to use RFID other than just to appease the retail giant, according to Peter Coleman, an analyst with securities firm SoundView Technology.
If Wal-Mart, known for its highly efficient business model, is taking RFID seriously, suppliers may want to look into how it can improve their business, according to Coleman.