HUD and DOJ challenge Facebook’s advertising platforms under the Fair Housing Act

Credit Bradley Arant Boult Cummings LLP and Lexology.com:

The U.S. Department of Housing and Urban Development (HUD) has filed an administrative complaint against Facebook alleging discriminatory advertising in violation of the Fair Housing Act (FHA). HUD alleges that housing advertisers can use Facebook’s advertising tools and algorithms to exclude applicants based on protected categories such as race, sex, or national origin.

Four days after the HUD complaint was filed, the U.S. Attorney for the Southern District of New York filed a Statement of Interest in support of a separate federal lawsuit in which the National Fair Housing Alliance (NFHA) alleges Facebook allows housing advertisers to discriminate against certain protected classes. The NHFA litigation, as well as the actions of HUD and the Justice Department, could have far-reaching implications for financial institutions, lenders, real-estate brokers, property managers, and any other organization advertising real estate over social media.

Moreover, these filings signal that HUD and the Justice Department will not be shy about applying Title VIII protections to emerging technologies, such as big data.

In 2016, ProPublica issued a report claiming that housing advertisers could use Facebook’s advertising platforms to exclude users based on protected categories. Following this report, NFHA, a non-profit dedicated to eliminating housing discrimination, began its own investigation of Facebook’s advertising platform.

Two years later, NFHA and three other public interest groups filed a complaint in the United States District Court for the Southern District of New York alleging that Facebook’s advertising platform violated the FHA and the New York City Human Rights Law. The NFHA lawsuit targets housing advertisers’ ability to “exclude” or “include” certain categories of users while using Facebook’s advertising tools.

For instance, plaintiffs allege that in 2016, NFHA created an advertisement for a fictitious apartment using Facebook’s “Ad Manager” platform. NFHA then purportedly used Facebook’s “exclude” function to exclude “African-Americans” and “Hispanics” from the advertisement’s audience. NFHA also allegedly used Facebook’s “boost” capability to amplify its posts advertising the fake apartment by sending the post to some users while excluding others who fell within certain protected categories.

In 2018, NFHA alleges it conducted a second investigation after Facebook announced it would no longer allow housing, credit, and employment advertisers to exclude users based on racial categories. During this second investigation, NFHA alleges it was still able to create ads and “boost” posts that excluded individuals based on race, sex, family status, and disability status.

The plaintiffs seek a declaration that Facebook’s advertising policies violate the FHA and the New York City Human Rights Act, an injunction, compensatory and punitive damages, and attorneys’ fees. Five months after the NFHA plaintiffs filed their lawsuit, HUD filed a “me-too” administrative complaint alleging similar conduct against Facebook. According to HUD, Facebook allows housing advertisers to discriminate by, among other things, “showing ads only to men or only to women[,]” “showing ads only to users whom Facebook categorizes as interested in the ‘Christian Church,’ ‘Jesus,’ ‘Christ’ or the ‘Bible[,]’” and “drawing a red line around majority-minority zip codes and not showing ads to users who live in these zip codes.” According to the HUD complaint, “[t]he alleged policies and practices of Facebook violate the Fair Housing Act based on race, color, religion, sex, familial status, national origin and disability.”

Finally, on August 17, 2018, the Justice Department – through the U.S. Attorney for the Southern District of New York – filed a statement of interest in support of the NFHA plaintiffs. Specifically, the Justice Department filed its Statement of Interest in response to Facebook’s motion to dismiss, which argued, in part, that Facebook was “merely an interactive computer service” and therefore was immunized from FHA liability by the Communications Decency Act. In the Statement of Interest, the Justice Department rejected Facebook’s characterization, asserting that “[b]y allegedly collecting user data, collating user data, and classifying its users based in part upon protected characteristics, Facebook participates in the ‘mak[ing],’ of an ‘advertisement’ ‘that indicates any preference, limitation, or discrimination.’”

While the NFHA suit and the recent filings by HUD and the Justice Department address alleged publisher liability and do not directly relate to the advertisers themselves, housing advertisers should pay close attention to this litigation. Social media advertising has become an integral part of businesses marketing to consumers and, as illustrated by this litigation, data-driven, targeted marketing likely will create new and unexpected avenues for liability. Moreover, HUD and the Justice Department’s apparent interest in how the FHA applies to social media marketing suggests agencies and regulators may start scrutinizing how housing advertisers use big data and targeted advertising to market and sell housing.