Kmart Uses Facial Recognition Technology: Violating Customer Privacy Laws?

Kmart has come under scrutiny after Australia’s privacy regulator ruled that its use of facial recognition technology (FRT) breached national privacy laws.

The Office of the Australian Information Commissioner (OAIC) found that between 2020 and 2022, the retailer captured biometric details of thousands of shoppers across 28 stores without their consent.

While the company argued that the technology was designed to prevent fraud, the ruling has raised bigger questions about how much surveillance is acceptable in everyday retail spaces.

The case highlights a growing conflict between protecting businesses from theft and safeguarding consumer privacy.

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Key Takeaways

1. Kmart breached privacy laws by using facial recognition without customer consent.

2. The regulator ruled the practice was disproportionate and unnecessary for fraud prevention.

3. Experts are divided, with some defending FRT as a useful tool against theft and crime.

What the Regulator Found

The OAIC report, led by Privacy Commissioner Carly Kind, concluded that Kmart’s use of facial recognition went against the Privacy Act.

The law treats biometric information, such as facial data, as sensitive. This means businesses must notify individuals and seek explicit consent before collecting it, except in limited situations.

Why Kmart Fell Short

• Kmart argued that it relied on exemptions designed to address unlawful activity and protect staff safety.

• The regulator disagreed, stating that applying this technology to every customer was disproportionate since only a small number were suspected of refund fraud.

• Commissioner Kind also noted there were less invasive ways to manage fraud that did not involve scanning every face entering a store.

The determination is not the first of its kind. Bunnings, another Wesfarmers-owned brand, was also found to have breached privacy laws when it used the same technology to prevent theft and violence.

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The Debate Over Facial Recognition in Retail

While the OAIC has ruled against Kmart and Bunnings, not everyone agrees the decision is fair. Experts argue that the technology can be an effective tool when deployed responsibly.

Arguments in Defense

Security consultant Scott Taylor explained that facial recognition systems do not store photos of people but instead convert facial features into numerical codes. These codes are then matched against databases of known offenders.

According to Taylor, this process reduces privacy risks while helping businesses safeguard their staff and customers.

He also suggested that reducing theft through advanced technology could help lower costs for shoppers and create safer workplaces for retail staff. In other countries, trials of FRT have shown positive results.

For example, a New Zealand supermarket chain found that the use of cameras reduced harmful incidents by around 16% while deleting nearly all data within one minute of capture.

Ongoing Concerns

Despite these potential benefits, privacy watchdogs argue that widespread use of FRT creates unnecessary risks, including the possibility of misuse or data leaks. They emphasize that consent and transparency must be at the center of any deployment.

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Retail Theft and the Bigger Picture

Part of the reason Kmart and other retailers turned to facial recognition is the growing issue of retail theft.

Wesfarmers CEO Rob Scott has described theft as a national problem in Australia, with Victoria being a particular hotspot.

Rising Theft Rates

The Australian Retailers Association (ARA) reported that theft cases reached their highest level in 21 years in 2024.

Nearly half of these incidents occurred in retail stores, which now face what the ARA calls a “retail crime crisis.”

Beyond financial losses, staff are increasingly exposed to threatening situations when confronting offenders.

Balancing Safety and Privacy

Retailers argue they need more effective tools to reduce theft and protect employees. However, regulators maintain that while safety is important, it does not override privacy rights.

Commissioner Kind clarified that businesses can use technology for security but must still comply with the Privacy Act.

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Conclusion

The case against Kmart underscores a growing tension between retail security and customer privacy.

On one side, retailers are struggling with rising theft and seeking new tools to protect staff and reduce losses.

On the other, regulators and privacy advocates warn that scanning every customer who walks into a store crosses a line.

The OAIC’s decision makes it clear that while facial recognition is not banned, businesses must meet a high threshold of consent and necessity before using it.

For consumers, the debate serves as a reminder to remain aware of how personal information is collected.

For businesses, it highlights the importance of striking a balance between innovation and compliance.

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FAQ

Why was Kmart found to have breached privacy laws?

Because it collected biometric data through facial recognition without notifying or obtaining consent from customers.

Was the technology used in all Kmart stores?

No, it was deployed in 28 stores between 2020 and 2022.

Did Kmart keep all customer images?

According to the company, only images that matched suspected fraudsters were retained, while others were deleted.

Is facial recognition banned in Australian retail stores?

No, but its use is heavily restricted, requiring consent and strong justifications under the Privacy Act.

Why are retailers interested in facial recognition?

They hope to use it as a tool to reduce theft, fraud, and threats against staff, though it remains controversial.

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