Facebook on Tuesday agreed to overhaul its lucrative targeted advertising system to settle accusations that landlords, lenders and employers use the platform to discriminate, a significant shift for a company that built a business empire on selling personal data.
The settlement compels Facebook to withhold a wide array of detailed demographic information - including gender, age and Zip codes, which are often used as indicators of race - from advertisers when they market housing, credit and job opportunities.
Facebook has long allowed advertisers to target potential customers and employees based on their demographics and interests, as gleaned from the vast trove of data the platform collects.
Now, the social media giant is stepping away from that approach for certain advertisers, amid mounting evidence that its micro-targeting techniques were abused.
Although those techniques helped propel Facebook into one of the world's most successful advertising businesses - with 99 percent of its $55.8 billion in revenue last year deriving from ads - Tuesday's settlement is unlikely to deal a major blow to the company's bottom line.
But it could make the platform less valuable to certain advertisers. Many companies use Facebook to recruit workers and promote credit cards.
"It may not affect Facebook very much, but it will hurt small advertisers who require that narrow targeting to sell products," said Laura Martin, a senior Internet analyst at the investment bank Needham & Co. "If companies can't reach their micro-targeted demographic, they are going to walk away from advertising on Facebook. All ad pricing could go down if demand by advertisers fall."
The change arrives at a moment when Facebook and other social media platforms face growing scrutiny from regulators, lawmakers and the public. The company is being investigated by the Federal Trade Commission, the Securities and Exchange Commission and several state attorneys general over the Cambridge Analytica data privacy controversy.
Civil rights advocates have warned for years that Facebook's ads violated anti-discrimination laws because advertisers were able to use the data to exclude African Americans, women, seniors, people with disabilities and others.
The Justice Department allowed a lawsuit to proceed last year over Facebook's objections, arguing that the company can be held liable for ad-targeting tools that deprive people of housing offers.
Until now, the company has made only minimal tweaks to its systems and largely resisted calls for change, arguing that its practices were standard in online advertising.
Tuesday's announcement will require a major overhaul of Facebook's software. Facebook said it will make the changes by the end of the year, creating a separate portal to limit how much advertisers for housing, employment and credit can micro-target their audience.
"We are fully taking all the steps we can to protect people from discrimination on our platform," Sheryl Sandberg, chief operating officer at Facebook, said in an interview. "We believe this settlement goes not just to [the letter of] the law but beyond the law in taking very, very strong action to make sure any discrimination doesn't happen."
Sandberg declined to comment about whether Facebook's advertising practices were illegal.
The news is likely to reverberate through the tech industry. Google, Twitter and Amazon all offer similar demographic targeting tools, and companies such as LinkedIn have brisk businesses in employment recruiting.
"Presumably every platform now will abide by the same terms of this settlement or risk being sued," Martin said.
The settlements resolve lawsuits and other legal challenges filed in recent years by the National Fair Housing Alliance, the American Civil Liberties Union, the Communications Workers of America and others.
"This type of discrimination that we thought was stamped out in the '60s and '70s by our civil rights laws should not be given a new life in the digital era," said Galen Sherwin, a senior staff attorney at the ACLU. "This settlement establishes that the Web is not a civil-rights-free zone."
The company is paying out less than $5 million to the parties, including a $2.5 million settlement with the NFHA to train advertisers on how to comply with housing and lending laws, and advertising credits to promote fair housing.
"This is going to have a very broad reach," said Lisa Rice, president and chief executive of the NFHA. "Technology and how data is used is really the new civil rights frontier."
Federal housing law prohibits discrimination based on race, color, religion, national origin, gender, disability or family status. Facebook said the new platform will also prevent advertisers from discriminating based on sexual orientation, age, ethnicity and other characteristics covered by state and local civil rights laws.
The NFHA and other housing groups sued Facebook last March, alleging that the company created pre-populated menus for advertisers that made it easy to block people with disabilities or families with children from seeing rental or sales ads.
Facebook classified people according to their demographics, behaviors and interests using terms such as "English as a second language," "disabled parking permit" or "Telemundo" - which critics argue are proxies for protected categories of people.
Fair-housing groups say that online companies such as Facebook have superseded billboards, "rent signs" and "newspaper classifieds" to become the hubs where people look for homes and jobs. Facebook has "abused its enormous power," the suit alleged.
The housing groups conducted investigations in Miami, New York, San Antonio and Washington, D.C., to gather evidence for their lawsuit, creating dozens of ads that excluded families with children, women, the disabled and African Americans, Hispanics and people with certain national origins - all without consumers ever knowing they had been excluded.
The ACLU and other groups filed a legal complaint in September with the federal Equal Employment Opportunity Commission, accusing Facebook of enabling discriminatory job postings with its ad-targeting tools. Some companies were targeting ads only to people under age 45.
The legal efforts followed a 2016 ProPublica investigation that found that Facebook allowed advertisers to exclude African Americans, Latinos and Asian Americans. While Facebook later said it would bar housing, employment and credit ads that discriminate based on "ethnic affinity," it continued to allow other forms of discriminatory targeting, including based on gender and disability, civil rights groups alleged.
The company signed a legally binding pledge in July promising it would no longer allow advertisers to discriminate, as part of a settlement with the attorney general of Washington state. As part of the pledge, Facebook removed thousands of additional targeting categories.
Tuesday's announcement goes much further. The new advertising platform will introduce technological barriers to prevent certain companies from significantly restricting their intended audience.
Advertisers will still be able to target by location, with a minimum geographic radius of 15 miles.
Previously, Facebook largely relied on advertisers to comply with its anti-discrimination policies but did not actively block them from using the targeting categories.
"Our policies already prohibit advertisers from using our tools to discriminate," Sandberg wrote in a blog post Tuesday. "We've removed thousands of categories from targeting related to protected classes such as race, ethnicity, sexual orientation, and religion. But we can do better."
Facebook said it also will try to detect advertisers attempting to use prohibited terms and reroute them to the new limited portal.
But some analysts say that Facebook's new ad platform, like other enforcement systems the company has built, could be easily gamed.
"People will have to either self-identify as a real estate broker, a landlord or an employer, or Facebook is going to have to identify them. Both options are going to be difficult to operate in practice," said Dennis Yu, chief executive of BlitzMetrics, a digital marketing company that focuses on Facebook ads. "There are many ways to circumvent the system."
He pointed out that Facebook's recently built system for identifying political ads has let many advertisers slip through the cracks.
Facebook also pledged to make its advertising more transparent by the end of the year. As part of the settlement, it plans to give users the ability to search all housing-related ads - for rentals, sales, financing, appraisals and insurance - that appear on the platform regardless of whether users have received the ads in their individual news feeds.
The company has a similar system for political ads, which are visible to any Facebook user, even if they are not in the friend network of the person who posted them. The system was created in response to findings that Russian operatives and others abused Facebook by creating hyper-targeted political ads.
Anthony Romero, executive director of the ACLU, said Tuesday that he hopes Facebook's "first of its kind" settlement will be a "pace-setter for other platforms going forward."
Facebook is still working to address a separate complaint from the Department of Housing and Urban Development, which has accused the company of enabling illegal housing discrimination by allowing advertisers to exclude people based on race, gender, Zip code or religion.
Sandberg declined to say how much the advertising changes are projected to cost the company.
"We care more about protecting people from discrimination than about lost revenue or the costs incurred," she said, adding that the company will use technology as well as humans to review ads placed on the new platform.
Kieley Taylor, global head of social for GroupM, a major ad-buying conglomerate whose financial clients frequently use Facebook to target ads for credit cards, said companies are watching closely to determine whether advertising on Facebook will become less valuable to them.
The loss of data could cause a "meaningful decline in efficiency," she said. "We're instructing teams to keep a close eye on performance."
It was supposed to be a chance for Muslim and Jewish House Democrats to ease tensions and find common ground. It ended with one lawmaker in tears.
At a late-night meeting blocks from the Capitol, about a dozen lawmakers shared their raw experiences with bigotry and discrimination, hoping the stories would bridge the glaring interfaith divide. Suddenly, Rep. Dean Phillips, a Jewish Democrat, shattered a moment meant to be about listening and learning - not politics.
Phillips felt he had to address what had been unspoken for nearly two hours - the recent divisive remarks of Rep. Ilhan Omar, a Muslim who suggested American supporters of Israel have an "allegiance to a foreign country."
Those kinds of remarks, Phillips said, represented "tips of the arrow" - small but devastating offenses that made Jews fearful of a rising tide of anti-Semitism. Phillips told his fellow Minnesota freshman that she had to apologize and said the group should publicly affirm Israel's right to exist and protect itself.
His words stunned the three Muslim Democrats in the room, as well as some other Jewish members and third-party participants. Rep. Rashida Tlaib of Michigan, a Palestinian American is critical of the Israeli government's treatment of the Palestinians, grew emotional and started to cry as she spoke of her grandmother's suffering in the West Bank at the hands of Israelis. "She would treat you like a grandson," she said to Phillips, according to two people in the room.
The abrupt end to the March 5 meeting - the second gathering aimed at reconciliation broke on a bitter note - was a discomfiting moment in a previously unreported, behind-the-scenes effort inside the diverse class of House Democrats to foster tolerance amid the withering pressure of Washington.
Democrats' convulsive efforts to respond to recent Omar criticisms of Israel have exposed ugly rifts in the party over religion and U.S. ally Israel that have boiled over on Twitter and in the public sphere. Those interparty fights have distracted from the party's legislative agenda and fueled political attacks from Republicans, including President Trump.
It's why Democrats on both sideshave formed a small group to try to work past their differences. Success or failure of the private meetings could have an impact on the party's larger effort to unite across schisms on race, gender and ideology.
Despite the harsh endingto the meeting, several participants who spoke on the condition of anonymity to discuss the private conversations said the huddle had a profound effect: Some in the room heard stories of hardship from their colleagues they knew nothing about.
The next day, at a heated closed-door caucus meeting, some of those attendees pushed back against leadership's plan to reprimand Omar for the same comments Phillips objected to the night before. Some Jewish participants of the meeting broke with people of their own faith who wanted to rebuke Omar by name. They had come to know her, did not believe her comments were intentional and objected to the idea of rebuking a woman who told them the night before about death threats she'd received.
"If we can't be on the same page, it's hard for the country to," said Phillips, adding that he learned from the gathering - and the effect his words had. "We have an opportunity here because the eyes are on us. We know that."
House Democratic leaders responded with a sweeping resolution condemning all forms of hate that passed overwhelmingly on March 7.
Days before the first meeting on Feb. 13, Omar posted tweets attributing politicians' support of Israel to campaign money donated by pro-Israel groups - "it's all about the benjamins baby," she wrote. Critics earlier had unearthed comments Omar made during violence between Israelis and Palestinians in 2012, suggesting Israel had "hypnotized" a world that did nothing to stop the bloodshed.
Those comments outraged many Jewish Democratic lawmakers, who pushed House Speaker Nancy Pelosi (Calif.) and her lieutenants to condemn Omar's remarks. Omar apologized the next day and later deleted the tweets.
When the group met two days later at a former lawmaker's house on Capitol Hill, the controversy had mostly cleared, and Rep. Jamie Raskin, D-Md., was determined to keep the mood casual, according to several who attended who spoke on the condition of anonymity to discuss the private sessions.
He asked everyone to go around the room to say something about a grandparent, starting the conversation by talking about how his grandfather had been the first Jewish member of the Minnesota legislature - a pathbreaker like many of the freshman House Democrats.
The idea, according to people familiar with the session, was to humanize one another. Raskin would not discuss details of the meeting but said that he is "constantly trying to get members together to talk about the experiences and values that have brought them into public life."
Phillips, a wealthy businessman representing the Minneapolis suburbs, spoke of his grandmother teaching him piano and how he was adopted from a poor family into a wealthier one after his father died in the Vietnam War.
Rep. Andre Carson of Indiana, a Muslim convert elected in 2008, told a story about his grandmother picking him up from a shelter when he was little after his mother, who struggled with schizophrenia, had a severe episode. That grandmother, former congresswoman Julia Carson, ended up raising him and introducing him to politics.
House Appropriations Committee Chairwoman Nita M. Lowey (N.Y.) talked about how her grandparents left Russia to escape anti-Jewish pogroms and were eager to embrace America.
"I think it was just the beginning, and I think it's important that we get to understand each other and try and educate people, understand people's different points of view," Lowey said about the meeting.
But the conversations left some members wanting to delve deeper into personal struggles- especially in light of Omar's comments. Rep. Andy Levin (Mich.), a former labor organizer and synagogue president, began organizing a more formal event that would focus on anti-Semitism, calling on leaders of a liberal Jewish group, Bend the Arc, to attend and moderate the discussion.
Levin had hoped the leftward tilt of the organization would make it easier to discuss such a sensitive topic with liberal members who sympathize with Palestinians. He also extended the invitation to freshmen allies of Omar and Tlaib - including Reps. Alexandria Ocasio-Cortez, N.Y., and Ayanna Pressley, Mass. - in hopes of making the two Muslim women more comfortable.
But days before the meeting, Omar again sparked an uproar with her comments about American supporters of Israel. Several Jewish Democrats had quietly started pressing Pelosi to pass a resolution rebuking Omar by name and condemning anti-Semitism. Lowey used Twitter to "urge her to retract this statement and engage in further dialogue with the Jewish community," which in turn prompted a public retort from Ocasio-Cortez.
When the small group convened, tensions emerged almost immediately. A Bend the Arc facilitator made a joke about Jews and money to try to clear the air. But Rep. Jahana Hayes (Conn.), one of the freshman allies invited to join the session, grew serious and asked why the facilitator could talk like that when someone like Hayes could not.
"It's not okay," Hayes said this past week when asked about the specific exchange. "These [sorts of jokes] are off-limits. It's confusing for someone like me who is trying to learn."
Hayes, however said, the meeting - which delved into the history of anti-Semitism and charged language - was helpful for people who don't know the meaning of certain words: "I'm looking to try to understand everybody's perspective," she said. "This isn't my community."
The conversation took a different turn as some non-Jewish members in the room admitted they didn't know what anti-Semitism looks like. The Jews present appreciated the candor and sought to share stories illuminating why certain words had negative meaning.
Soon lawmakers were talking about their own experiences with discrimination.
Toward the end of the session, Phillips felt the need to bring up a personal hurt: Omar's recent comments.
Omar, who supports a two-state solution to the Israeli-Palestinian conflict, said nothing as Tlaib described the effects Israel's policies on her Palestinian family. Others in the room saw racial undertones in Phillips's comments, offended that a wealthy white businessman representing an affluent suburban community was suggesting a black refugee such as Omar incited fear.
Phillips, startled by Tlaib's emotional reaction, embraced her afterward and told her that he would like to meet her grandmother someday.
Tlaib and Omar declined to comment about the meeting.
Asked about the exchange, Phillips said he had not intended to offend anyone and had learned from it. "It wasn't planned, and it wasn't what we expected. But I think it was cathartic. It certainly was for me," Phillips said.
Since then, the group has huddled on the House floor to discuss what happened. Although the exercise has been uncomfortable at times, many think it was worthwhile and are planning to do it again, perhaps focusing on anti-Muslim bigotry and racism .
"This wasn't a one-time thing," Levin said in an interview in which he spoke generally about the meeting but declined to comment on specific events. "We are committed to building authentic relationships of mutual understanding and solidarity to tackle all forms of discrimination and oppression. The only way to do that is by having private dialogues where folks can speak freely so we can really learn from and about each other."