By Mae Anderson and Barbara Ortutay, Associated Press
NEW YORK (AP) — The federal government charged Facebook with high-tech housing discrimination Thursday for allegedly misusing its vaunted ability to deliver ads with surgical precision to certain groups of people and not others.
The civil charges by the U.S. Department of Housing and Urban Development could cost the social network millions of dollars in penalties. But more than that, they strike at the very business model that has made Facebook so rich, and raise questions of whether this could signal more regulatory pressure on the industry to come.
HUD said Facebook’s ad-targeting system is fostering discrimination by allowing landlords and real estate brokers to exclude certain people — for example, minorities, non-Christians, immigrants or residents of particular neighborhoods — from seeing their ads for houses and apartments.
“Facebook is discriminating against people based upon who they are and where they live,” HUD Secretary Ben Carson said. “Using a computer to limit a person’s housing choices can be just as discriminatory as slamming a door in someone’s face.”
In a statement, Facebook expressed surprise over the charges, saying it has been working with HUD to address its concerns and has taken steps to prevent discrimination, including eliminating thousands of targeting options last year that could be misused by advertisers.
Just last week, Facebook said it would overhaul its ad-targeting system to prevent discrimination not just in housing listings but in credit and employment ads as well, as part of a settlement with the American Civil Liberties Union, the National Fair Housing Alliance and other groups.
“We’re disappointed by today’s developments, but we’ll continue working with civil rights experts on these issues,” the company said.
The charges were seen as more evidence that Facebook is in crosshairs of lawmakers, regulators and activists. It is already wrestling with several government investigations in the U.S. and Europe over its data and privacy practices.
The technology at the heart of the clash with HUD is what has helped turned Facebook into a giant with annual revenue of close to $56 billion. It can offer advertisers and groups great ability to direct messages to exactly the crowd they want to reach.
HUD said Facebook is allowing advertisers to exclude people based on their neighborhood by drawing a red line around those areas on a map. The company was also accused of giving advertisers the option of showing ads only to men or only to women.
The agency also charged that Facebook allowed advertisers to exclude parents; those who are non-American-born; non-Christians; and those interested in Hispanic culture, “deaf culture,” accessibility for the disabled, countries like Honduras or Somalia, or a variety of other topics.
Advertisers were also able to exclude people based on ZIP code, to avoid showing ads to people in areas with large minority populations, HUD said.
The case will be heard by an administration law judge unless HUD or Facebook decides to move it to federal court.
“The nature of their business model is advertising and targeted advertising, so that is a slippery slope. That is their business model,” said Dan Ives, an industry analyst with Wedbush Securities. “The government launched this missile and caught many in the industry by surprise.”
Ives said the move may mean U.S. regulators are taking broader aim at the digital advertising market, not just Facebook.
“This is a clear shot across the bow for Facebook and others,” he said. “There is potentially more regulatory worries than maybe investors were fearing.”
Facebook is already under fire for allowing fake Russian accounts to buy ads targeting U.S. users to sow political discord during the 2016 presidential election. The company has also been criticized for allowing organizations to target groups of people identified as “Jew-haters” and Nazi sympathizers.
HUD brought an initial complaint against Facebook in August. Facebook said in its statement that it was “eager to find a solution” but that HUD “insisted on access to sensitive information — like user data — without adequate safeguards.”
Ortutay reported from San Francisco. AP Business Writer Michelle Chapman in Newark, New Jersey, contributed to this report.
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