By John D. McKinnon and Jeff Horwitz
WASHINGTON -- Federal officials accused Facebook Inc. of
violating fair-housing laws 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 accused the
social-media giant Thursday of violating the Fair Housing Act by
unlawfully discriminating based on race, color, national origin,
religion and more "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."
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 to draw red lines around low-income and minority
neighborhoods and to either deny services, or target 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. With the power
of its algorithms, 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.
Daniel Nasaw contributed to this article.
Write to John D. McKinnon at john.mckinnon@wsj.com
(END) Dow Jones Newswires
March 28, 2019 17:58 ET (21:58 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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