US accuses Facebook of fostering discrimination in ads based on race and religion

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Federal officials accused Facebook Inc. Thursday of unlawful discrimination by allowing real-estate companies to target potential customers by race, religion and other factors, and signaled that other online advertising platforms are in its crosshairs.

The Department of Housing and Urban Development said the social-media giant violated the Fair Housing Act “by restricting who can view housing-related ads.”

HUD has sent letters to a number of technology companies, including Alphabet Inc. unit Google and Twitter Inc., asking for more information about their sophisticated advertising systems, an agency official said. Those inquiries are preliminary and don’t amount to formal investigations, but could lead to additional probes.

“Just because a process to deliver advertising is opaque and complex doesn’t mean that it exempts Facebook and others from our scrutiny and the law of the land,” HUD General Counsel Paul Compton said in a statement. “Fashioning appropriate remedies and the rules of the road for today’s technology as it impacts housing are a priority for HUD.”

A spokesman for Facebook said the company was surprised by HUD’s action, saying it had been working with the department to address the agency’s concerns. The spokesman said the company last year eliminated thousands of targeting options subject to misuse, among other measures.

“While we were eager to find a solution, HUD insisted on access to sensitive information—like user data—without adequate safeguards,” the spokesman said in a statement. “We’re disappointed by today’s developments, but we’ll continue working with civil rights experts on these issues.”

‘Using a computer to limit a person’s housing choices can be just as discriminatory as slamming a door in someone’s face,’ said HUD Secretary Ben Carson, seen above center in Austin, Texas, this month. PHOTO: JULIA ROBINSON FOR THE WALL STREET JOURNAL
Google didn’t address questions from the Journal about how it has responded to HUD’s request and whether the alleged flaws in Facebook’s algorithms would also be common to its own.

“We’ve had policies in place for many years that prohibit targeting ads on the basis of sensitive categories,” a Google spokeswoman said in an email. “Our policies are designed to protect users and ensure that advertisers are using our platforms in a responsible manner.”

Twitter didn’t immediately respond to a request for comment.

The allegations against Facebook amount to a modern spin on redlining, or the historic practice by some real-estate brokers, lenders and others of drawing red lines around low-income and minority neighborhoods and either denying services, or targeting them with higher rates.

Facebook’s trove of data allowed it to go much farther, according to HUD—for example, enabling ad buyers to exclude people that some unscrupulous landlords might seek to avoid, including people who expressed interest in an “assistance dog,” a “mobility scooter” or “deaf culture.”

It also allowed advertisers to block people who identified themselves as interested in “Puerto Rico Islanders,” “Hijab Fashion” and “Hispanic Culture,” according to HUD. Facebook offered customers hundreds of thousands of exclusionary categories.

Galen Sherwin, a senior staff attorney for the ACLU Women’s Rights Project, who helped lead a settlement announced last week with Facebook over many of its practices, said her group “would encourage HUD to investigate other platforms.”

The ability to target consumers by their identifying characteristics “is a feature that’s being touted,” Ms. Sherwin said. “That’s true in general of digital advertising—it allows microtargeting based on user data in ways that were never possible before.”

Private lawsuits against Facebook already have led the company to agree to changes that could lessen the impact of discrimination, for example by limiting the audience demographic categories that advertisers can target.

But the company’s use of algorithms and machine learning in advertising also is a big problem, according to critics. The HUD case could go further in forcing the company to change those practices as well.

Among other things, HUD charged that Facebook’s machine learning predicts likely responses to an ad to help determine its distribution. That can effectively become a source of bias against protected groups itself, the agency said. “Respondent’s mechanisms function just like an advertiser who intentionally targets or excludes users based on their protected class,” the complaint says.

Some experts in online discrimination said the HUD charges show the need for Congress to step in and clarify that existing antidiscrimination rules in housing, employment and lending apply just as clearly in the digital world as in the physical world. That hasn’t always been clear.

“Congress really needs to engage in a very deliberative process to see what applies to the digital space,” said Nicol Turner Lee, a Brookings Institution fellow. “We don’t want a regress” in civil rights because antidiscrimination laws were generally written before the internet, she said.

One potential problem for the government’s effort to impose antidiscrimination rules online is a law written by Congress in the 1990s. It gives online platforms sweeping immunity from liability for the actions of their users.

That law has been used by online firms in the past to shield themselves from government action and private lawsuits alike. The federal courts are currently divided over how it applies in the housing discrimination context, but it could arise as a potential hurdle for HUD’s case against Facebook, lawyers said.

Still, Thursday’s action underscores how big internet companies—once darlings of Washington—are running into more problems. In addition to the HUD action, Facebook is under investigation by the Federal Trade Commission over privacy concerns. Congress last year also made it easier to go after online platforms for sex trafficking.

Meanwhile, the Justice Department last summer filed a brief siding with the National Fair Housing Alliance in a case against Facebook. Justice Department lawyers said that Facebook could be held liable for discriminatory practices, despite the 1990s immunity law. The government also said decisively that it was unlawful to send ads selectively in a discriminatory way.

“It was a critical turning point showing the federal government was on our side,” said Peter Romer-Friedman, a lawyer with Outten & Golden LLP.

Facebook’s discrimination troubles date to 2016, when the ProPublica news organization reported how advertising could be targeted to—or exclude—users of particular races, genders and ages. Such targeting is acceptable in certain contexts, but federal law and state laws prohibit such discrimination in advertising for housing, jobs and many financial products.

Following the revelations, Facebook pledged to prevent such discriminatory advertising by blocking advertisers’ ability to screen people protected by federal discrimination laws from seeing their advertising. HUD opened—and then dropped—an investigation into Facebook’s practices.

HUD reopened its investigation in 2018, and Facebook settled a lawsuit with the state of Washington by agreeing, again, to prevent discrimination on its advertising platform. The ACLU and fair-housing groups also filed a suit that Facebook settled just last week that included payments of just under $5 million. As part of that settlement, Facebook said it was removing age, gender and ZIP Code targeting for housing, employment and credit-related advertisements.

In the wake of that settlement, Facebook said it believed it was working toward a similar agreement with HUD. But negotiations over how to proceed on a HUD request for key Facebook data broke down.

According to someone familiar with the request, HUD sought an array of data Facebook uses to personalize content to specific users, including location information, users’ consumption of past content, what features of Facebook they engage with and who they interact with on the platform. Facebook balked, this person said, and HUD sued.

Advertisers are waiting to see if changes Facebook makes going forward will prohibit targeting that makes the platform so useful, said an executive at a large ad-buying agency.

In the meantime, buyers are identifying additional, alternative mediums for advertisers targeting people in the market for a home. The executive expects home sites to see bigger commitments from advertisers, and therefore an increase in ad revenue, in 2020.