In an effort to better track inventory and sales of consumer goods, companies are eyeing a World War II-era technology that has only recently become affordable enough for widespread use. Trouble is, say some privacy advocates, it is also a technology that may reveal much more about consumers than they are willing to share.

The technology is called Radio Frequency Identification, or RFID, and according to a description by the RFID Journal, an online industry publication, the “most common applications are tracking goods in the supply chain, tracking assets, tracking parts moving to a manufacturing production line, security (including controlling access to buildings and networks) and payment systems that let customers pay for items without using cash.”

Developers describe RFID as an automatic data capture technology that uses tiny tracking chips affixed to products. The chips can be used to track items at a distance, through personal items such as a purse, backpack or wallet. More and more companies would like to replace the bar codes affixed to consumer goods with the RFID chips so they can better manage assets and merchandise, and reduce theft and product loss.

Yet, according to some industry watchers, the ability to track consumer goods wherever they go also means being able to track consumers who purchase such items. And that’s a technology some privacy groups say is ripe for abuse. So dangerous is the potential that such groups are calling for regulations limiting its application.

“RFID technology is moving forward at an incredible pace, and there is an urgent need for this legislation,” says Katherine Albrecht, founder and director of Consumers Against Supermarket Privacy Invasion and Numbering, or CASPIAN.

“Companies have already begun embedding these chips in products people buy today. For all you know, these chips could be in your home now. The problem is, you have no way of knowing,” she said.

One such company is Gillette, the nation’s largest shaving-products manufacturer. Together with the nation’s largest retailer, Wal-Mart Stores Inc., Gillette had planned to conduct an in-store trial of RFID this summer at a Brockton, Mass., Wal-Mart store.

The plan called for Gillette to embed a tiny microchip in each of its products so store managers could track Gillette store stock and alert them if products were running low. Eventually, say critics, the technology could be used to literally track products from store shelves to homes.

However, according to a report in the Washington Times yesterday, Wal-Mart has abandoned its “smart shelf” experiment for the time being. Instead, the paper said, the retailer will incorporate RFID technology at each of its 103 distribution centers around the country to monitor inventory.

The decision, said the Times, came after Albrecht and CASPIAN called for a letter-writing campaign against Wal-Mart. But retailer spokesman Tom Williams denied that was the motivation for Wal-Mart changing its “smart shelf” plans.

“We didn’t cancel anything. We just didn’t follow through with this particular idea,” he told the paper.

But the Times report said other large retailers, such as Target and Home Depot, are currently testing the RFID technology to monitor inventory in their storerooms and distribution centers.

CASPIAN isn’t waiting for corporations to develop privacy standards. Her group has drafted the “RFID Right to Know Act of 2003,” which would “mandate labeling of RFID-enabled products and consumer-privacy protections,” according to a draft of the bill.

While the technology itself is not new, the applications for which it is being developed are. And since the technology could eventually be used to provide de facto real time tracking of every American consumer, widespread RFID use is on questionable legal grounds, say critics.

WorldNetDaily put the question to the Justice Department – does the use of such technology violate privacy rights? Officials did not respond by press time, but some consumer advocacy groups think such technology is legally questionable.

“The explosion of computers, cameras, sensors, wireless communication, GPS, biometrics and other technologies in just the last 10 years is feeding what can be described as a surveillance monster that is growing silently in our midst,” said Barry Steinhardt, director of the Technology and Liberty Program for the American Civil Liberties Union.

“Scarcely a month goes by in which we don’t read about some new high-tech method for invading privacy, from face recognition to implantable microchips, data-mining to DNA chips, and RFID identity chips in our clothing,” he told the House Government Reform Committee’s Subcommittee on Technology May 20. “The fact is, there are no longer any technical barriers to the creation of the surveillance society.”

And Marc Rotenberg, director of the Electronic Privacy Information Center, told the Washington Times the issue of privacy would likely dominate future RFID applications and discussions.

“I think the privacy rights of customers is looming in the background as the largest issue. I think the retailers are a little bit concerned,” he said, according to the Times report.

At present, chips that can be embedded in every consumer item are down to about 20 cents each, according to The Economist, a British financial magazine. While cost is falling dramatically, however, the industry says other technologies like cell phones can interfere with the chips’ radio signal.

Still, critics say at the rate technology is advancing, widespread tracking of consumer goods isn’t a far-off fantasy. Albrecht says developing companies are ready to move forward. And she says developers are looking to devise a “Trojan horse” plan to get the chips into products and into the marketplace.

“Imagine walking into a store and having a computer take an inventory of everything you’re wearing – right down to the size and color of your underwear,” says Albrecht. “Store employees could even read the contents of your wallet to determine whether you’re a desirable customer or someone they want to ignore based on your financial value. The possibilities for discrimination are quite disturbing.”

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