Meta Platforms Inc (NASDAQ:FB) reached an agreement with the US Department of Justice (DOJ) over allegations the owner of Facebook "engaged in discriminatory advertising".
Under the deal, Meta will stop using an advertising tool for housing ads, known as 'Lookalike Audience', that allegedly relied on a discriminatory algorithm, a statement from the DOJ said.
Meta will also now develop a new system to address racial and other disparities caused by its use of personalization algorithms which will be subject to DOJ approval and court oversight.
This settlement marks the first time that Meta will be subject to court oversight for its ad targeting and delivery system.
The DOJ claimed Meta targeted users with housing ads based on algorithms that relied partly on characteristics protected under the Fair Housing Act (FHA), such as race, national origin and sex.
The lawsuit accused the tech company of facilitating housing discrimination by letting advertisers specify that ads not be shown to FHA protected groups.
The lawsuit arose from a discrimination complaint filed in 2019 with the Department of Housing and Urban Development (HUD), which referred the case to the DOJ once the tech giant elected to have the matter heard in federal court.
During the next six months, Facebook will create a new way to address racial and other disparities caused by its use of personalisation algorithms in its housing ad delivery system, said the DOJ statement.
The settlement agreement can be terminated if the new system is inadequate.
Meta must also pay a penalty of US$115,000, the maximum penalty available under the FHA.
Facebook already announced in March 2019 it would revamp its ad-targeting systems to prevent discrimination in housing, credit, and employment ads as part of a legal settlement with the American Civil Liberties Union, the National Fair Housing Alliance, and others.
Changes then were designed to stop advertisers who wanted to run housing, employment, or credit ads from targeting people by age, gender, or zip code.