• by Wendy Davis  @wendyndavis, January 19, 2022

A group of Facebook users are asking a federal appellate court to revive claims that the company's former ad-targeting options violated discrimination laws by enabling a “high-tech form of redlining.”

“Facebook mined demographic and other data from its online users, then used that data to create its own algorithms to divide the data into categories (including categories based on protected classes), and then created the content for its advertising platform that enabled housing advertisers to exclude those Facebook users in protected classes from seeing housing ads,” the Facebook users argue in papers filed Wednesday with the 9th Circuit Court of Appeals. “This is a high-tech form of redlining, and, though different from the original form of redlining, it remains illegal.”

The battle dates to 2019, when a group of Facebook users led by New York resident Rosemarie Vargas alleged in a class-action complaint that Facebook's ad-targeting platform violated civil rights laws by allowing advertisers to block housing ads from users based on factors such as race, sex or age.

The case was one of several lawsuits against Facebook over allegedly discriminatory ads. The complaints in all of those cases largely stemmed from a 2016 ProPublica report that Facebook allows advertisers to prevent their ads from being shown to users who belong to certain "ethnic affinity" groups -- including people Facebook has identified as having an ethnic affinity of Black, Asian-American and Hispanic.

By the time Vargas and the others sued, Facebook had already agreed to revise its targeting options to prohibit advertisers of housing, employment or credit offers from targeting ads based on age, gender, ZIP code and ethnic affinity.

Last August, U.S. District Court Judge William Orrick in the Northern District of California dismissed the lawsuit at an early stage. He described the complaint as “the sort of generalized grievance” that doesn't give people the right to proceed in federal court.

Orrick specifically said that the complaint lacked the kind of detailed allegations that, if true, would show they had been harmed by Facebook's former ad-targeting system.

Vargas and the other users are now asking the 9th Circuit to reverse Orrick's decision and reinstate their claims.

Among other arguments, they contend they were injured because they were denied their right to receive information about housing.

“By enabling housing advertisers to exclude members of a specific protected class(es) from its audience, Facebook ensured that not all members of protected classes had access to Facebook’s entire online housing market,” they argue.

Orrick also ruled that Facebook was protected by Section 230 of the Communications Decency Act for any illegal ads posted by outside parties, noting that the company's former ad-targeting tools were neutral.

“Use of the tools was neither mandated nor inherently discriminatory given the design of the tools for use by a wide variety of advertisers,” he wrote.

Section 230 generally shields online companies from liability for ads and content posted by third parties. But that law has some exceptions -- including one for content "developed" by the providers. The scope of that exception is unclear.

Vargas and the others argue that Section 230 doesn't protect Facebook in their case, writing that the company “deliberately created an ad platform with content that enabled housing advertisers to exclude protected class members from receipt of ads, based on Facebook’s own mining of its users’ data.”

“The critical issue in many cases, including this appeal, is whether the interactive computer service provider displayed content on its website that was created or developed entirely by third parties, or content that the defendant is responsible, in whole or in part, for creating or developing itself,” they argue.

Facebook is expected to respond to the argument by February 18.