NSW Fair Trading Minister, Reba Meagher, has told retailers planning to use of radio-frequency identification (RFID) customer tags to be upfront with consumers.
Minister Meagher has stated that "consumers have a right to know" if retailers are using the technology.
-If consumers are not aware that a radio tag is contained in a product they are the ones that could be unnecessarily tracked", said Meagher.
The call came despite repeated claims by retailers and the technology industry that the tags are harmless.
Dr Cheryl Shearer, IBM business developer for emerging markets, told ZDNet Australia in an interview last week, that privacy concerns regarding RFID technology were often misguided.
However, Minister Meagher says that until a code is developed and implemented in the retail industry there still remains a risk that "consumers' privacy rights could be compromised."
"Tags may not be deactivated when a consumer purchases an item and leaves a store, thereby allowing ongoing monitoring of a consumer," said Minister Meagher. She suggests that tags be disabled with a "kill-switch" at the point of purchase to prevent such an occurrence.
Dr. Shearer said such fears were unfounded as at a retail level the miniature chips would only be able to operate over short distances.
Minister Meagher brought up other concernsabout the use of RFID tags for retail applications such as the possibility of customer data falling into the wrong hands.
"What level of information would be available, or what damage could be done, if the database of a major retail chain were hacked into," said Minister Meagher, adding that the technology may have serious criminal consequences in the future.
"As the technology develops will criminals of the future be able to move from house to house or person to person scanning what is available before making their move?" she asked.
However, Dr Shearer pointed last week that many consumers' private information is already stored in databases, such as those maintained by airlines and telecommunications companies.
Numbering and barcode standards body, EAN Australia, has been given the task of drafting a code of conduct for local retailers using the tags, which are expected to be deployed on a mass scale in Australia later this year.
Chad Gates, technology director of the Australian Retailers Association and chairman of the team drafting the code, said it was specifically designed to address privacy concerns of the consumer and to make retailers aware of their obligations when using the technology.
"The industry felt that RFID has been very high profile in the media and has become an issue of concern with privacy matters," said Gates.
He added that the concerns over the new technology are "similar to the concerns felt when barcodes were first introduced" and that "we just have to make sure everyone is comfortable with the technology."
Gates says the development team will meet in May to consider the first draft of the RFID code of conduct, with the finalised copy expected by the end of this year.