Facebook agrees to dismantle targeted ad system for job, housing and loan ads after discrimination complaints

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Facebook on Tuesday agreed to overhaul its lucrative targeted advertising system to settle accusations that landlords, lenders and employers use the platform to discriminate against African-Americans, women, seniors, people with disabilities and others.

The far-reaching settlement compels Facebook to withhold a wide array of detailed demographic information – including Zip codes, gender and age – from advertisers when they market housing, credit and job opportunities.

Although the settlement is unlikely to deal a major blow to Facebook’s bottom line, the change represents a significant shift for a company that has built one of the most successful advertising platforms in history.

Facebook has long allowed advertisers to target potential customers and employees based on their demographics and interests, as gleaned from the vast trove of data the platform collects. Now, the social media giant is stepping away from that approach, amid mounting evidence that its microtargeting techniques were abused.

Civil rights advocates have warned for years that Facebook’s ads violated anti-discrimination laws because advertisers were able to use that data to exclude specific groups of people. The Justice Department allowed a lawsuit to proceed last year over Facebook’s objections, arguing that the company can be held liable for ad-targeting tools that deprive people of housing offers.

Until now, the company made only minimal tweaks to its systems and largely resisted calls for change, arguing that these ads were standard in online advertising.

Tuesday’s announcement will require a major overhaul of Facebook’s software, and could make the platform less valuable to certain advertisers. Many companies use Facebook to recruit workers.

Facebook said it will make the changes by the end of the year, creating a separate portal to limit how much advertisers for housing, employment and credit can micro-target their audience.

“We are fully taking all the steps we can to protect people from discrimination on our platform,” said Sheryl Sandberg, chief operating officer at Facebook, in an interview with The Washington Post. “We believe this settlement goes not just to [the letter of] the law but beyond the law in taking very, very strong action to make sure any discrimination doesn’t happen.”

Sandberg declined to comment about whether Facebook’s advertising practices were illegal.

The settlements resolve lawsuits and other legal challenges filed in recent years by the National Fair Housing Alliance, the American Civil Liberties Union, the Communications Workers of America and others.

It arrives at a moment when Facebook is facing growing scrutiny from regulators, lawmakers and the public. The company is being investigated by the Federal Trade Commission, the Securities and Exchange Commission and several state attorneys general over the Cambridge Analytica data privacy controversy.

“This type of discrimination that we thought was stamped out in the ’60s and ’70s by our civil rights laws should not be given a new life in the digital era,” said Galen Sherwin, a senior staff attorney at the ACLU. “This settlement establishes that the web is not a civil-rights-free zone.”

The company is paying out less than $5 million to the parties, including a $2.5 million settlement with the National Fair Housing Alliance to train advertisers on how to comply with housing and lending laws, and advertising credits to promote fair housing.

“This is going to have a very broad reach,” Lisa Rice, president and chief executive of the National Fair Housing Alliance said. “Technology and how data is used is really the new civil rights frontier.”

Federal housing law prohibits discrimination based on race, color, religion, national origin, gender, disability and family status. Facebook said the new platform will also prevent advertisers from discriminating based on sexual orientation, age, ethnicity, and other characteristics covered by state and local civil rights laws.

The National Fair Housing Alliance and other housing groups sued Facebook last March, alleging that the company created pre-populated menus for advertisers that made it easy to block people with disabilities or families with children from seeing rental or sales ads.

Facebook used terms such as “English as a second language,” “disabled parking permit,” or “Telemundo” – which advocates argue are proxies for protected categories of people.

Fair housing groups say that online companies such as Facebook have superseded billboards, “rent signs,” and “newspaper classifieds” to become the hubs where people look for homes and jobs. Facebook has “abused its enormous power,” the suit alleged.

The housing groups conducted their own investigations in Miami, Florida; New York; San Antonio, Texas; and Washington, D.C., creating dozens of ads that excluded families with children, women, the disabled and African-Americans, Hispanics and people with certain national origins – all without consumers ever knowing they had been excluded.

The ACLU and other groups filed a legal complaint last September with the federal Equal Employment Opportunity Commission, accusing Facebook of enabling discriminatory job postings with its ad-targeting tools. Some firms, for example, were targeting ads only to people under age 45.

The legal efforts followed a ProPublica investigation beginning in 2016 that found that Facebook allowed advertisers to exclude African Americans, Latinos and Asian Americans. While Facebook later said it would bar housing, employment and credit ads that discriminate based on “ethnic affinity,” it continued to allow other forms of discriminatory targeting, including gender and disability, civil rights groups alleged.

The company signed a legally binding pledge last July promising it would no longer allow advertisers to discriminate, as part of a settlement with the attorney general of Washington state. As part of the pledge, Facebook removed thousands of additional targeting categories.

Tuesday’s announcement goes much further. The new advertising platform will introduce technological barriers to companies promoting housing, employment and credit ads from significantly restricting their intended audience.

No longer will they be able to target – or exclude – users based on religious and political viewsor Zip code, which advocates argue serves as a proxy for race. Advertisers will still be able to target by location, with a minimum geographic radius of 15 miles,. Companies could still potentially get around Facebook’s new system if they advertise in other categories.

Previously, Facebook largely relied on advertisers to comply with its anti-discrimination policies, but did not actively block them from using the targeting categories.

“Our policies already prohibit advertisers from using our tools to discriminate,” Sandberg wrote in a blog post Tuesday. “We’ve removed thousands of categories from targeting related to protected classes such as race, ethnicity, sexual orientation, and religion. But we can do better.”

Facebook said it also will try to detect advertisers’ attempts to create housing, employment and credit ads using prohibited terms. The company will then block those ads and reroute advertisers to the new limited portal.

Facebook also pledged to make its advertising more transparent by the end of the year. As part of the settlement, it plans to give users the ability to search all housing-related ads – for rentals, sales, financing, appraisals and insurance – that appear on the platform regardless of whether users have received the ads in their individual news feeds.

The company has a similar system for political ads, which are visible to any Facebook user, even if they are not in the friend network of the person who posted them. The system was created in response to findings that Russian operatives and others abused Facebook by creating hyper-targeted political ads.

Anthony Romero, executive director of the American Civil Liberties Union, said Tuesday that he hopes Facebook’s “first of its kind” settlement will be a “pace setter for other platforms going forward.”

Facebook is still working to address a separate complaint from the U.S. Department of Housing and Urban Development, which has also accused the company of enabling illegal housing discrimination by allowing advertisers to exclude people based on race, gender, Zip code or religion.

Sandberg declined to say how much the advertising changes are projected to cost the company.

“We care more about protecting people from discrimination than about lost revenue or the costs incurred,” she said, adding that the company will use technology as well as humans to review ads placed on the new platform.

Like its peers in Silicon Valley, Facebook has struggled with racial diversity and discrimination – issues on which federal lawmakers have shined a spotlight. White men make up much of Facebook’s workforce. Black employees hold about 1 percent of the technical roles, while Hispanic employees hold 3 percent, according to company data.

Facebook has become more vulnerable to accusations of advertising discrimination because its microtargeting capabilities go beyond those of its rivals. It gathers consumer data using self-reported information by users as well as through tracking their online activity, building “arguably the most complete consumer profile on earth.”

In 2017, Facebook earned 98 percent of its $40.65 billion in revenue from advertisers.