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3/1/2004
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German Retailer Halts Radio Chip Practice

Metro Group says it will stop putting smart tag chips inside its customer-loyalty cards--a practice that had sparked protests from privacy advocates.

BERLIN (AP) -- German retail giant Metro Group said Friday it will stop putting "smart tag" chips inside customer loyalty cards, a practice that sparked protests by privacy advocates who say the cards could allow stores to secretly track consumers as they shop.

Metro has given out about 10,000 of the cards with embedded radio-frequency Identification chips since April as part of a broader effort to bring wireless technology into its stores and warehouses.

Cardholders will receive replacements with bar codes, Metro spokesman Albrecht von Truchsess said.

"There are concerns about having customer cards with RFID chips," he said. "We have to take them seriously and discuss them. With such an emotional debate going on, we said it's just not worth it."

Metro's plans to roll out a wireless inventory-tracking system in November, involving about 100 of its top suppliers and 250 of its stores, are not affected, von Truchsess said.

Metro has been testing the technology since April at a so-called "future store" in the German town of Rheinberg, near its Duesseldorf headquarters.

The RFID chip in the customer cards has allowed cardholders at the store to preview films cleared for viewers who are at least 16--the age at which Metro customers can get a card. Approaching a playback device with the card rolls the movie clip.

Metro played down the suspicions by privacy advocates and consumer groups, saying the RFID-equipped cards were never used to store or process customer behavior. "We never saw a privacy problem," von Truchsess said.

RFID chips broadcast a signal with information about a product and have been embraced for inventory control by major retailers including Wal-Mart.

In such schemes, receivers send information harvested from chips to central computers in order to precisely track goods in the supply chain.

The technology offers the prospect of more accurate inventory control than traditional bar codes, and also could help with concerns such as food safety by making the tracking of perishables easier.

A plan by clothing giant Benetton Group SpA to introduce smart tags in garments, allowing them to be tracked from factory to store, raised privacy concerns last year and Benetton subsequently said it was undecided on the project

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