Under the settlement, which comes in response to five separate legal actions alleging discrimination by Facebook's advertising system, Facebook will no longer allow advertisers selling housing, credit or employment opportunities to target users based on their age, gender or zip code.
If advertisers disclose that they are selling opportunities in housing, credit or employment — industries protected by civil rights laws — they will be subject to much closer scrutiny by Facebook.
Those advertisers will be able to choose from a couple hundred micro-targeting opportunities, rather than the tens of thousands available to advertisers in other categories.
"Housing, employment and credit ads are crucial to helping people buy new homes, start great careers, and gain access to credit," Facebook's Chief Operating Officer Sheryl Sandberg wrote in a blog post. "They should never be used to exclude or harm people. Getting this right is deeply important to me and all of us at Facebook because inclusivity is a core value for our company."
The settlement is the result of two years of negotiating between Facebook and multiple civil rights groups.
The debate was originally sparked when ProPublica reported in 2016 that Facebook was allowing advertisers to exclude certain users based on "ethnic affinity," which critics have argued is used as a proxy for race and ethnicity.
Since then, housing, employment and civil rights groups have raised concerns that Facebook was side-stepping civil rights laws by allowing advertisers to target or exclude certain groups.
Last year, the Department of Housing and Urban Development also accused Facebook of facilitating discrimination, saying the social network allowed realtors and landlords to exclude protected classes like racial groups from viewing their ads.
Facebook advertisers promoting housing, employment or credit opportunities will no longer be able to target people based on multicultural affinity. And Facebook will take away any ad targeting option that describes or "appears" to describe protected classes of people under federal, state and local civil rights laws.
Civil rights laws in the country prohibit discrimination on the basis of religion, sexual orientation, gender, ethnicity, national origin, and more.
Facebook says it is also working on a new portal to allow users to search for and view housing ads in the U.S. regardless of who the advertisers hoped to target.
The settlement announced Tuesday resolves legal challenges from the American Civil Liberties Union, the Communications Workers of America, the National Fair Housing Alliance and others.
"[The settlement] positions Facebook to be a pace-setter and a leader on civil right issues in the tech field," Lisa Rice, the executive vice president of the National Fair Housing Alliance (NFHA), said during a call with reporters. The NFHA in its lawsuit alleged that Facebook's advertising system had enabled discrimination based on race, national origin, sex, familial status, and disability.
"Technology really is the next civil rights frontier, which is why this settlement is so important," Rice said.
The groups alleged that Facebook’s ad system enabled advertisers to exclude certain users from seeing housing, employment and credit opportunities.
Before this point, Facebook had agreed to incremental changes in its advertising system. Now, it will be required to make fundamental changes to the software, including creating a new portal for housing, credit and employment advertisers.
"Today’s changes mark an important step in our broader effort to prevent discrimination and promote fairness and inclusion on Facebook," Sandberg wrote in the post.
As part of the settlement, the groups will be able to check in with Facebook to ensure advertisers are no longer discriminating against any protected groups.
Facebook's lawyers initially moved to have the cases dismissed, but under pressure from lawmakers and civil rights groups, it ultimately came to the Tuesday settlement.
Previous reports have found that groups were able to exclude women and people over 40 from seeing their advertisements on Facebook.
Facebook has also agreed to pay $5 million to settle the lawsuits.