On March 28, 2019, the U.S. Department of Housing and Urban Development (“HUD”) sued Facebook alleging that Facebook’s use of its artificial intelligence tools caused violations of the Fair Housing Act in permitting advertisers to target property advertisements based on race and national origin. No realtors or advertisers were named in this law suit, but because they could have been the real estate industry and its advertisers should take careful note of this case.

The Fair Housing act prohibits residential advertisements based on race, color, religion, sex, handicap, familial status, or national origin. The Housing Discrimination Complaint filed by HUD alleges that Facebook, through its artificial intelligence tools, facilitates housing discrimination in violation of the Fair Housing Act in that it “effectuates the delivery of housing-related ads to certain users and not others based on those users’ actual or imputed actual traits.”  Examples the Complaint cites include enabling advertisers to “base a red line around majority-minority zip codes and not showing ads to users who live in those zip codes,” and enabling “advertisers to discriminate based on national origin by not showing ads to users whom Facebook categorizes as interested in ‘Latin America,’ ‘Southeast Asia,’ ‘China,’ ‘Honduras’ ‘Somalia,’ the ‘Hispanic National Bar Association’ or ‘Mundo Hispánico.’”

Facebook has faced scrutiny for its ad-targeting practices before, most recently in 2016, but not in such an overt manner. In the current Complaint, HUD essentially asserts that Facebook permits advertisers to do with its AI platform what would be prohibited if it were to, say, place ads in newspapers that only reached certain ethnic groups. In the analog era such practices that discouraged and excluded members of certain groups from seeking housing in certain areas were known by terms such as “redlining” and “steering.” Indeed, the HUD Complaint uses the phrase “draws a red line.”

Facebook has not yet responded to the Complaint which was filed in the U.S. District Court for the Southern District of New York. Even though no advertisers or real estate brokers were named in the Complaint, the Fair Housing Act could be invoked by HUD in future actions. Claims could be brought for excluding members of certain groups in housing advertisements or other areas in which advertising discrimination is prohibited by federal law, such as employment or credit.

Advertisers and real estate brokers should review their instructions to platforms such as Facebook with regard to targeting of ads.

If you have questions regarding risks of legal exposure in targeting of advertisements, or in other uses of artificial intelligence, please contact Kenneth N. Rashbaum or Steven Ebert.