Federal and state laws have long prohibited discrimination in employment, housing and credit-related marketing and advertising. Title VII of the Civil Rights Act prohibits employment discrimination based on ethnicity, national origin, and other protected characteristics, which includes prohibiting discriminatory practices in the marketing and advertising of employment opportunities based on their content or target audience. The Age Discrimination in Employment Act prohibits discriminatory employment practices related to people who are 40 or older. Title VIII of the Civil Rights Act (the Fair Housing Act) prohibits housing discrimination, including discriminatory practices in the marketing and advertising of housing opportunities. The Equal Credit Opportunity Act prohibits discrimination in credit transactions, including discriminatory practices in the marketing and advertising of credit opportunities. There are many state laws which provide similar protections to their citizens, such as the Minnesota Human Rights Act and the California Fair Employment and Housing Act.

Targeted advertising is an advertising method which allows online advertisers to target their advertising to a specific audience of potential purchasers/consumers based on certain audience traits or other criteria. This allows companies to realize a higher return on ad spend (ROAS) by ensuring advertising dollars spent through pay-per-click (PPC) or cost-per-impression (CPI) models are directed towards the most relevant, and presumably receptive, audience for the company’s ads. For example, if the target audience for your product or service is millennials, there is little value to having online advertising delivered to Generation X or Baby Boomers, as the number of purchases/leads you generate from that audience will not justify the ad spend on them.  If you use an online, untargeted banner advertisement, it will be displayed to every website visitor whether or not in your target demographic. Targeting your ad spend to millennials will increase the return on your advertising dollars by ensuring it’s seen by the audience most likely to be interested in your advertisement, generating sales, leads, or applicants for your company in a cost-effective manner.

Targeted Ad Discrimination

Social media platforms such as Facebook offer targeted advertising to advertisers on their platform. Facebook allows you to target your advertising audience based on a number of different characteristics, such as age, location (e.g., ZIP code), gender, ethnicity, education level, and interests. For most products and services, this is extremely valuable. But for advertisers of employment, housing and credit opportunities, using targeted advertising to limit or restrict the target audience in a protected class or group can create unintended liability under federal and state laws, which I call “targeted ad discrimination.” This is a new, and real, risk for the significant numbers of employers, housing providers, and credit companies that use online targeted advertising to market their opportunities, goods, and services.

The potential for targeted ad discrimination has not gone unnoticed by the Federal Trade Commission.  In its January 2016 report “Big Data: A Tool For Inclusion or Exclusion?“, the FTC noted that “[i]n some cases, the Department of Justice has cited a creditor’s advertising choices as evidence of discrimination” and that “whether a practice is unlawful under equal opportunity laws is a case-specific inquiry, and as such, companies should proceed with caution when their practices could result in disparate treatment or have a demonstrable disparate impact based on protected characteristics.”

The Facebook Lawsuit

In November 2016, a class action lawsuit was brought in the Northern District of California against Facebook alleging targeted ad discrimination, following a ProPublica article that highlighted the ability to use Facebook’s targeted advertising to exclude users by “ethnic affinity.” The plaintiffs in Mobley et. al. v. Facebook, Inc., Case No. 5:16-cv-06440 (N.D.Cal.) allege that Facebook’s targeted advertising tools, which leverage the consumer profiles of its users created by Facebook, create a “pattern or practice” of facilitating discrimination against protected classes by employers and by providers of housing and credit by enabling them to target advertisements only to specific Facebook user groups or to exclude specific user groups from an advertisement’s audience, which has the result of targeting advertisements based on protected characteristics such as age, gender, ethnic background, or national origin.

Facebook has countered that targeted advertising allows brands to direct relevant advertising to audiences and that its advertising policies prohibit use of its targeted advertising tool for illegal purposes, and announced shortly after the lawsuit was filed that it would make changes intended to prevent the use of “ethnic affinity” marketing for housing, employment, and credit-related ads. It argues that it is shielded from liability under the Communications Decency Act, which protects online service providers for liability for third party content on their service. Facebook’s motion to dismiss is pending but on hold at the moment while the parties engage in mediation. ProPublica reported in November 2017 that it was still able to post rental housing ads on Facebook that they claim discriminated against ethnic groups. It remains to be seen whether Facebook will bear any liability for providing a targeted advertising solution that has the ability to be misused by its customers in violation of state and federal laws.

Advertisers Themselves May Face Liability, Too

In response to the uproar over potential interference with the 2016 US election, Facebook recently introduced new ad transparency features.  One aspect of these transparency features allows anyone to see information about the groups to which a Facebook ad is targeted. For example, by clicking on “Why am I seeing this?” on an advertisement in my Facebook feed for a Shark IONFlex™ vacuum, I was able to see the ad is targeted to “Member(s) of a family based household” who are “ages 18 to 64 who live in the United States.”)  While this may be OK for an ad for a vacuum, it could cause problems for a housing, employment, or credit-related ad.

According to Joel O’Malley (a shareholder at Nilan Johnson Lewis, a Minneapolis firm specializing in defense-side employment law), the plaintiffs’ firm that filed suit against Facebook has begun leveraging Facebook’s ad transparency features to examine the targeting criteria for employment, housing and credit-related Facebook ads, and sending letters to companies advertising on Facebook threatening class action lawsuits for discrimination in employment, housing, or credit advertising due to exclusions or limitations in their targeted advertising based on age, ethnicity, gender, or other protected characteristics. It is very likely that other class action firms may “smell blood in the water” and start sending similar letters or filing actions against companies for targeted ad discrimination through Facebook. It is also likely that other targeted advertising platforms and tools may face similar scrutiny, and the users of those tools may face similar letters or actions alleging targeted ad discrimination. It is also possible the FTC will take an increased interest in targeted ad discrimination.

What Companies Should Do

• Don’t wait to receive a letter or claim. Companies that use online advertising for employment, housing, or credit-related purposes should review their use of targeted advertising and the content of their targeted ads, and ensure targeted ads are composed and posted in a manner that does not give rise to a targeted ad discrimination claim. For example, ensure there are no age or ethnicity restrictions on job postings.
• Educate relevant internal stakeholders about targeted ad discrimination and the importance of being careful when using targeted advertising with certain types of advertisements, and what they should do if they receive a communication from a law firm regarding targeted ad discrimination.
• Consider engaging an employment law defense firm, or reach out to your existing employment law defense firm, to assist with a review of your company’s job postings to determine whether you are at risk and what steps can be taken to mitigate any discovered risk. For example, Nilan Johnson Lewis has developed an audit tool for its corporate clients to assess each employer’s unique level of risk.

Eric Lambert has spent most of his legal career working in-house as a proactive problem-solver and business partner. He is a corporate generalist who specializes in transactional agreements, technology/software/e-commerce, privacy, marketing and practical risk management. Any opinions in this post are his own. This post does not constitute, nor should it be construed as, legal advice. He is a technophile and Internet evangelist/enthusiast. In his spare time Eric dabbles in voice-over work and implementing and integrating connected home technologies.