BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
SB 1834 - Bowen Hearing Date:
April 27, 2004 S
As Amended: April 1, 2004 Non-FISCAL
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DESCRIPTION
Current federal law prohibits video stores and libraries from
sharing or selling customer records without first getting
express consent from the customer.
Current state law prohibits financial institutions from sharing
or selling personally identifiable non-public information with
unaffiliated third parties without obtaining a consumer's
consent. Financial institutions have to provide people with an
opportunity to "opt-out" of having their information shared with
a marketing partners and affiliates. [SB 1 (Speier), Chapter
241, Statutes of 2003, which takes effect July 1, 2004.]
Current state law prohibits stores with club card programs from
collecting drivers license and Social Security numbers on club
card applications and prohibits them from selling or sharing
personal customer information. [SB 926 (Speier), Chapter 586,
Statutes of 1999]
This bill prohibits any person or business from using radio
frequency identification (RFID) tags on store products and from
using RFID readers to collect personal information about people
unless the following conditions are met:
The information is collected only to the extent permitted
by law.
The information is provided by a customer in order to
purchase or rent an item at a store.
No information is collected before a customer actually
initiates a transaction to purchase or rent an item or after
the customer completes the transaction.
The information collected is about a customer who actually
presents the item for purchase and only in regard to that
item.
This bill prohibits libraries from using radio frequency
identification (RFID) systems unless the following conditions
are met:
The information is collected only to the extent permitted
by law.
The information is provided by a library patron in order
to borrow an item at that library.
No information is collected before a patron actually
attempts to borrow an item or after the patron completes the
transaction to borrow an item.
The information collected is about a patron who actually
attempts to borrow the item and only in regard to that item.
BACKGROUND
What Is RFID? Radio Frequency Identification (RFID) tags are
conceptually similar to, though much more advanced than, bar
codes found on most products people buy and to the magnetic
strips found on credit cards and driver's licenses.
RFID tags are tiny electronic computer chips that can be placed,
for example, on pallets of factory-sealed products to readily
tell shippers the quantity, type, date manufactured and
destination as they pass through warehouse doors that are
equipped with an RFID reader (also called an antenna). The tags
can be read from 25-30 feet away and at indirect angles,
removing any need for a person with a hand-held scanner to read
the product.
RFID tags are expected to replace bar codes on everything from
library books to groceries within the next decade, allowing
businesses to save millions of dollars by automating their
shipping and inventory processes. At about 20 to 50 cents per
tag and $1,000 per reader, RFID systems are still too expensive
for widespread use. Some experts project, though, that as
demand grows, manufacturing costs will drop and within the next
decade the use of RFID technology will become much more
prevalent.
Where Is RFID? RFID technology is making its way into people's
everyday lives in a number of areas:
RFID technology is what makes California's FasTrak
automated bridge toll payment program possible. Drivers
with FasTrak's RFID tags inside their car windshield can
cross bridges without having to stop and pay a cash toll
because the RFID tag contains a pre-paid dollar amount
(e.g., $50), and as the car passes the toll plaza, an
overhead antenna reads the tag and automatically deducts
the appropriate toll from the pre-paid account.
RFID is also used in the microchips frequently implanted
in pets with information on the name of their owner,
address, phone number, and more to help animal shelters
readily identify and reunite lost animals with their
owners.
Wal-Mart and Gillette recently tested the usefulness of
placing RFID tags on Gillette razor blades sold at Wal-Mart
stores. RFID antennas on store shelves tracked when
customers picked up razors, when they put them back on the
shelf, and when they carried them to the register.
Alexandra Hospital in Singapore used RFID tags to track
the movements of nurses, doctors, and visitors who came in
contact with SARS patients.
The European Union is considering embedding miniscule
RFID tags into the fibers of European currency to reduce
counterfeiting.
Wal-Mart has announced plans to require its top 100
suppliers to tag shipping cases and pallets with RFID
technology by 2005 and to require the rest of its suppliers
to start using RFID tags by 2006.
Wal-Mart and Procter & Gamble have tested RFID tags on
Max Factor Lipfinity lipstick sold at the Wal-Mart store in
Arrow, Oklahoma. Store shelves equipped with Webcams
allowed Procter & Gamble researchers in Cincinnati, Ohio,
to watch customers as they picked up and looked at the
lipsticks.
The San Francisco Public Library Commission has approved
plans to start tagging library books with RFID chips by
2005. Questions have been raised about whether the
technology will give anyone with an RFID reader, including
homeland security agencies and businesses, the ability to
track and identify people and the library books they're
carrying.
Philips Semiconductors, one of the world's largest RFID
chip makers, is working with Visa to replace the magnetic
stripes on the back of credit cards with RFID chips. Called
"contactless smart cards," these RFID-chipped credit cards
will allow scanning from a distance, whereas the magnetic
stripes currently used on the back of credit cards must be
manually swiped through a reader. Experts predict
contactless smart cards combined with the use of RFID on
individual store products will speed check out by allowing
shoppers to simply fill up their carts and head out the
door where RFID readers will automatically scan purchases
and bill the buyer's credit card.
Privacy Concerns With RFID . Privacy advocates are concerned
RFID will become as omnipresent as video surveillance and give
marketers another way to track people's movements and shopping
behaviors. For example, it would be theoretically possible for
businesses to tag everything with RFID, allowing RFID antennas
anywhere to scan the contents of people's purses, wallets,
shopping bags, not to mention identifying the makers of the
clothes, jewelry, and shoes they're wearing. The ability to
collect, aggregate, and manipulate this information could give
businesses a powerful marketing tool if they can use it to
profile and identify potential customers as they walk through
the mall entering stores and restaurants.
COMMENTS
1.Focusing On How Information Is Collected, Not What Information
Is Collected . Current law focuses on what information
businesses are allowed to collect from customers when they buy
something, the extent to which they can tie that information
to the customer's name, and who they can share it with or sell
it to with and without the customer's permission.
This bill doesn't change what information businesses can
collect on people when they buy products. Instead, it focuses
on the collection method - RFID, in this case - and whether
that collection method can be used to collect information on
customers outside of the standard rental/purchase transaction.
For example, a when a person goes through the checkout line at
the grocery store, the merchant can collect information on
what that person buys and tie it to their name. However, the
store - absent RFID technology - doesn't have the ability to
collect information on what products a person picks up in the
store but doesn't buy, nor can it collect information on what
they're wearing or what's in their wallet or purse. RFID
technology gives the store - and anyone else with an RFID
reader - the ability to collect that type of information,
assuming a person's clothing and items in their wallet or
purse have RFID chips embedded in them.
This bill attempts to address the privacy issues created by
this new technology by permitting stores and libraries to
collect the same information they already collect now using
bar codes, while at the same time banning the use of the
technology to track people as they shop or after they leave
the store.
2.Current Information Collection & Tracking Practices .
Technology already allows people to be tracked from their
morning coffee stop to their evening trip home from work. In
many cases, the federal or state government has acted to
restrict how businesses can use the information they collect
on people:
Every ATM or credit card purchase leaves a detailed
electronic record with both the store and the bank, which
over time can indicate interests, shopping patterns, likely
income levels, and more to financial institutions. Federal
law allows businesses to share that information freely with
their many affiliates and subsidiaries.
People who sign up for loyalty card programs at their
local supermarket are essentially allowing their grocer to
keep tabs on what they buy and how much they spend over
days, weeks and years. California law restricts how that
information can be used.
People who watch cable or satellite TV often don't
realize their viewing records can be monitored and used for
marketing purposes by their provider. However, federal and
state laws prohibit cable and satellite companies from
selling that data to others.
Libraries and video stores keep track of the books and
movies people check out, but federal laws ban them from
revealing that data to anyone.
Phone companies keep track of the local and long
distance calls their customers make, though federal and
state laws strictly prohibit them from listening in on
phone conversations or selling information about who their
customers call.
Many employers read employee e-mail, track keystrokes,
and follow employees as they visit Internet websites at
work. This practice isn't precluded by law and employers
aren't required to tell their employees their actions may
be monitored.
Internet businesses frequently drop bits of software,
such as "cookies" and "web bugs" on the computers of people
who visit their sites to track people's whereabouts online.
Surveillance cameras may be recording people as they
walk down city streets, enter businesses, or drive through
intersections or ride public transit. Some cities have
begun to test whether they can more effectively reduce
crime by combining surveillance cameras with face scanning
technology and criminal databases containing mugshots of
former inmates and suspected terrorists.
1.Is The Cart Going Before The Horse? As noted in the
"Background" section, while the use of RFID technology is
certainly growing, it's certainly not by any means widespread.
The Senate Subcommittee on New Technologies held two hearings
on RFID technology and privacy (August 18, 2003, and November
20, 2003). The Uniform Code Council and the Grocery
Manufacturers of America (GMA) testified at the hearing on
retail and manufacturing industry plans to increase the use of
RFID over the next decade.
The question posed by this bill is one the Legislature faces
on a number of issues. That is, whether it's better to
establish the ground rules for a new technology or practice
before it become widespread so it can be developed with those
limitations in mind, or whether it's more appropriate to wait
for a "problem" to develop before addressing the issue.
2.What's next? While RFID is destined to replace the bar code
on store products, some day a new technology may replace RFID
chips. The author and committee may wish to consider whether
the bill should be amended to cover other electronic devices
or tags containing product codes that can be read remotely in
order to cover a broad set of possible future devices without
having to introduce new legislation.
POSITIONS
Sponsor:
Author
Support:
None on file
Oppose:
California Chamber of Commerce
California Grocers Association
Consumer Specialty Products Association
Grocery Manufacturers of America
Jennie Bretschneider
SB 1834 Analysis
Hearing Date: April 27, 2004