Get Ready for the Age of Consumer Monitoring
RFID tags, GPS devices, and cell phones can tell more about you than you might want anyone else to know.
By Erick Schonfeld, July 23, 2004
They'll track us through our cars and computers. They'll track us through our phones and TVs. They'll even track us through our clothes. I'm not talking about the government. This will be a more insidious form of surveillance. Whether it's by placing cookies on our computers, uploading our TV viewing habits, inserting radio-frequency identification (RFID) chips in every product we pick up from retailers' shelves, or installing GPS devices in our cars, corporate surveillance will become a bigger reality in our everyday lives. So get ready to be monitored.
Of course, we are already monitored every time we swipe a loyalty discount card at the local supermarket, make an airline reservation, or buy a book from Amazon (AMZN). But new wireless technologies, such as RFID and GPS chips, are increasingly making it possible for corporations to physically monitor consumers. Even most cell phones can now be used to pinpoint your location.
The motivation behind all of this tracking is simple. In business, not only is information power, but it is also profitable. The more detailed data a company can collect about its customers, the easier it is to sort through those customers and decide which ones to pamper and which ones to discard. Mass marketing is a brute-force approach that is gradually being replaced with ever finer market segmentations, sometimes even down to the individual. After all, the rise of the data warehouse in the 1990s was driven by the need to distinguish between the most profitable, loyal customers and the most expensive, demanding ones. But companies' ability to collect consumer-specific data stopped at the checkout counter or with the completion of each transaction.
Now cheap RFID and GPS chips, as well as cell phones, hold the promise of finding out what consumers do with a product or service after it is purchased. This is not necessarily a bad thing. The GPS chip, sensors, and cell phone in GM's (GM) OnStar car navigation computer calls an OnStar dispatcher whenever your airbags are deployed in a severe crash so an ambulance can be sent right away to the correct location. A European insurance company, Aviva, is piloting a service in the United Kingdom that charges customers based on their driving habits if they agree to put a GPS monitoring device in their cars. Aviva can track how often a customer drives, at what times, how far, where, and how fast. If you are a safe or infrequent driver, you pay less for insurance, and Aviva reduces the risk of shelling out cash for big claims.
RFID is a little further out. Wal-Mart (WMT) and other retailers are still struggling with getting RFID chips on pallets and boxes for inventory tracking, but eventually the chips could be as ubiquitous as the bar code. Once they are on every product, there is no technical reason those products couldn't continue to be tracked after they leave the store. As long as the chips are not deactivated at the checkout, they can be detected -- along with all the product information embedded in them -- by any RFID reader. Checkout deactivation should become the norm (just as antitheft tags are removed today once an item is paid for), but it is not difficult to imagine scenarios in which consumers will be offered incentives to keep the chips alive.
For instance, what if appliances like refrigerators, medicine cabinets, and garbage cans were equipped with RFID readers so that consumers could keep an inventory of all the stuff they buy, use, and discard? And what if that household inventory information could be sent back to Wal-Mart to generate shopping lists to replenish whatever was consumed? For that kind of convenience, people might not mind giving up their privacy.
Once these monitoring technologies are in place, however, they could lead to potential privacy abuses. Take the car-insurance GPS device. While the service is completely voluntary, as it becomes more widespread, insurers could force poorer consumers to accept it whether they like it or not. "There definitely is a coercive element here," agrees Beth Givens, director of the Privacy Rights Clearinghouse, a nonprofit consumer advocacy organization.
"For many people, in order to save money on their insurance premium, they would have to allow their car to be outfitted."
And what if the police subpoenaed your GPS records to bust you for speeding or place your car near the scene of a crime? It wouldn't be the first time GPS tracking was used against consumers. Some car rental companies have relied on GPS monitors to levy steep fines on renters who take the vehicles out of a given state or who speed. In one sign of a backlash, a current bill in California proposes outlawing this sort of customer tracking.
A similar potential for abuse exists with RFID chips. A grocery store in Germany operated by the Metro Group embedded RFID chips in customer loyalty cards without disclosing that information. When customers found out, they picketed the store and the company had to issue new, chip-free cards. The fear here, says Katherine Albrecht, founder of consumer privacy group Caspian, is that stores could actively discriminate against their least profitable (and usually lower-income) shoppers. Once a chip is in a loyalty card, a store could link personal identity with shopping history. Add electronic shelf pricing displays to the mix, and there would be nothing to stop a store from raising the price of a jar of peanut butter, say, when a less desirable customer approaches, and lowering it when a more desirable one does. If the top 20 percent of a store's customers account for 80 percent of its profits, why even bother with the bottom 20 percent? "The industry refers to those people as bottom-feeders," Albrecht says. She contends that some unscrupulous retailers even try to discourage that bottom 20 percent from returning to the store with "higher prices or poor service."
A bigger concern, perhaps, is what happens to the products once they leave the store. Goodyear and Michelin, for instance, are introducing tires with RFID chips so they can be easily identified in case of a recall. That sounds sensible enough. But once the chips are in the tires, there's nothing to stop state troopers from setting up RFID readers on highways to catch speeders. (Arguably, they could do the same thing with EZ-Pass, which also uses RFID chips. But who cares about surveillance as long as you can get where you're going faster, right?)
Or what if there were RFID chips embedded in everyone's clothes and then the police walked around with hidden RFID readers at antiwar rallies? If they could cross-reference those identity tags with those in the customer database of an obliging retailer or manufacturer, it would be almost as effective as implanting an RFID chip in every citizen.
Thankfully, most of these ugly scenarios are still hypothetical. But to avoid them in the future and still reap the benefits of these new technologies, corporations would be wise to adhere to some reasonable rules of the road. Here are a few to start with:
1. Avoid secret placement of monitoring hardware, tags, or tag readers.
2. Kill the tags at checkout as a default.
3. Obtain consumers' consent for any tags that will remain active beyond the checkout.
4. Tell consumers what data is being collected and stick to those limits.
5. Don't impose penalties, such as refusing a return or refund, for destroying tags.
Now all we need is a technology that will make sure these rules are followed.
Erick Schonfeld eschonfeld@business2.com is an editor-at-large for Business 2.0.
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