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The use of RFID has engendered considerable controversy and even product boycotts by consumer privacy advocates. Consumer privacy experts Katherine Albrecht and Liz McIntyre are two prominent critics of the "spychip" technology. The two main privacy concerns regarding RFID are:

· Since the owner of an item will not necessarily be aware of the presence of an RFID tag and the tag can be read at a distance without the knowledge of the individual, it becomes possible to gather sensitive data about an individual without consent.

· If a tagged item is paid for by credit card or in conjunction with use of a loyalty card, then it would be possible to indirectly deduce the identity of the purchaser by reading the globally unique ID of that item (contained in the RFID tag). This is only true if the person doing the watching also had access to the loyalty card data and the credit card data, and the person with the equipment knows where the purchaser is going to be.

Most concerns revolve around the fact that RFID tags affixed to products remain functional even after the products have been purchased and taken home and thus can be used for surveillance and other purposes unrelated to their supply chain inventory functions.

The RFID Network argued that these fears are unfounded in the first episode of their syndicated cable TV series by letting RF engineers demonstrate how RFID works. They provided images of RF engineers driving an RFID-enabled van around a building and trying to take an inventory of items inside. They discussed satellite tracking of a passive RFID tag, which is surprising since the maximum range is under 200m.

The concerns raised by the above may be addressed in part by use of the Clipped Tag. The Clipped Tag is an RFID tag designed to increase consumer privacy. The Clipped Tag has been suggested by IBM researchers Paul Moskowitz and Guenter Karjoth. After the point of sale, a consumer may tear off a portion of the tag. This allows the transformation of a long-range tag into a proximity tag that still may be read, but only at short range – less than a few inches or centimeters. The modification of the tag may be confirmed visually. The tag may still be used later for returns, recalls, or recycling.