Responding to pressure from consumer privacy advocates, Metro Group has decided to drop the use of RFID tags in loyalty cards at its showcase Extra Future Store in Rheinberg, Germany.

Metro is the fifth largest retailer in the world. It joins Benetton and Wal-Mart in scrapping or changing retail aspects of RFID strategies due to consumer backlash on privacy grounds.

At the Rheinberg store, Metro had embedded RFID chips in loyalty cards. the purpose was to comply with German law and prevent anyone under age 16 from viewing certain movies through a viewing service provided in the store.

However, consumer privacy advocates threatened to demonstrate outside the store on Saturday.

Key factors that seemed to get Metro in trouble were (1) its failure to notify consumers in advance about the RFID chips, and (2) its failure to take adequate measures to prevent the chips from being misused. According to this report from Wired.com:

"Activists recently discovered RFID chips embedded in the store's customer loyalty cards. They also found them in products for sale there, including goods from IBM, Gillette and Procter & Gamble. Metro failed to notify customers that they were being tracked. Although Metro told activists the chips worked only while customers were inside the store, activists discovered that a kiosk used to deactivate the chips didn't completely disable the tags."

Activists were not satisfied with the company's announcement dropping the tags. Privacy groups such as FoeBud want a moratorium on item-level product tagging.