It's already happening--check the next Hewlett-Packard printer you buy at Wal-Mart or that Ann Taylor blouse you picked up. Chances are a radio-frequency ID tag came home with your purchase.

That doesn't mean the debate has ended over whether RFID infringes on personal privacy. Take a bill pending in the California Senate, sponsored by state Sen. Joe Simitian, D-Palo Alto: It aims to curb RFID use in government-issued documents by putting a three-year moratorium on putting chips in driver's licenses, library cards, and similar documents, and requiring protective measures such as encryption for chips used in documents like student IDs.

Privacy advocates, including the Electronic Privacy Information Center, and civil-liberties groups continue to press the issue. The general public, by and large, hasn't worked itself into a lather yet, says Ray Everett-Church, principal consultant at privacy consulting firm PrivacyClue, but that day is coming. "It will freak people out" if they're not alerted to the presence of such chips in their purchases, he says. "They will feel like they've been taken advantage of," which is never good for business.

As companies look more closely at using RFID tags on products rather than just on cases or pallets, it's critical to be up front with potential customers about their presence. Best Buy Inc. has a plan for item-level RFID tagging, which could happen as soon as a year from now. The advantages to the retail chain are to keep track of item-level inventory and monitor loss prevention and theft control; the advantage to consumers is being able to find a particular CD through a kiosk-based, real-time inventory system and move more quickly through checkout lines by just scanning an entire cart at once.

Customers will have the option of deactivating the tags or keeping them live, says Paul Freeman, Best Buy's EPC RFID program director. Doing the latter will enable the product to remain associated with its built-in RFID tracking number for improved warranty, repair, or return service. For instance, customers could view the progress of their item through Best Buy's repair centers over the Web.

Companies also point out to worried consumers that businesses face more pressing issues than tracking their customers' RFID-tagged purchases. At the EPCglobal U.S. Conference 2005 in September, Herb Markwardt, RFID project leader at Tyson Foods Inc., explained that there are still issues just getting RFID tags read in perfect conditions, "much less someone driving down the street in front of the house and trying to read what's in your fridge."

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The Little Chip That Couldn't (Yet)