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HUD Sues Facebook, Alleges Discrimination In Housing Ads

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HUD Sues Facebook, Alleges Discrimination In Housing Ads

Federal officials are accusing Facebook Inc. (NASDAQ: FB) with violating the Fair Housing Act in a lawsuit, alleging the social media company’s advertising system allows advertisers to target certain types of people with housing ads, effectively preventing other types of people from seeing ads for certain homes.

The charges of discrimination were brought Thursday by the federal Department of Housing and Urban Development and filed in an administrative law court.

Facebook shares were down slightly Thursday morning after the charges were announced. 

What Happened

The complaint asks an administrative judge to require Facebook to completely overhaul its advertising targeting system, compensate anyone who was discriminated against and impose civil penalties on the social media giant.

Facebook settled a lawsuit last week with the ACLU and other plaintiffs over the same practices, CNBC said

“Facebook is discriminating against people based upon who they are and where they live,” HUD Secretary Ben Carson said in a press release.

“Using a computer to limit a person’s housing choices can be just as discriminatory as slamming a door in someone’s face.”

The federal Fair Housing Act prohibits landlords, real estate agents and anyone else from keeping people from buying a home or renting an apartment based on race, color, national origin, religion or other factors.

Facebook’s system essentially allows advertisers to do just that, the complaint alleges, because it allows advertisers to target ads to be seen only by people who identify themselves in a certain way, such as “Christian” or “child-free.”

It also works the other way, meaning advertisers can choose to block certain groups from seeing ads, according to HUD.

For example, a developer advertising for a new subdivision could have Facebook people who identify as “foreigners"; people with a service animal; people interested in Hispanic culture; or women left out of the audience for an ad. 

Why It Matters

Changing the system has huge implications, as it speaks to the value of Facebook has as an advertising system. It allows advertisers to target audiences extremely narrowly and avoid other audiences who aren't likely to respond to the advertising.

HUD's move appears to ratchet up the pressure on Facebook — which has already promised to change the way its microtargeting system for advertising works as part of the aforementioned agreement with the ACLU.

The settlement was meant to respond to broader accusations of discrimination, but also included the conduct alleged Thursday by HUD: that the system allows housing advertisers to exclude certain people from ever seeing ads for some homes.

A spokesperson for Facebook told The Verge that the company was taken aback by the new charges when the company has already started working on addressing the issue.

“We’re surprised by HUD’s decision, as we’ve been working with them to address their concerns and have taken significant steps to prevent ads discrimination,” the spokesperson told the publication. “Last year we eliminated thousands of targeting options that could potentially be misused, and just last week we reached historic agreements with the National Fair Housing Alliance, ACLU and others.”

Price Action

Facebook shares were down 0.16 percent at $165.60 at the time of publication Thursday. 

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