NetChoice Urges Calif. Supreme Court to Reverse Appeals Court's Facebook Ads Ruling

A California state appeals court ruling in Liapes v. Facebook (docket A164880) would make it unlawful to direct online information and advertisements to the people most likely to be interested in them, said NetChoice in an amicus letter Monday to the California Supreme Court, urging it to review the case.

The Sept. 21 ruling reversed a previous decision in California Superior Court saying Section 230 protected Facebook from accountability in a case involving targeted ads. The 2020 class action brought by 48-year-old Samantha Liapes claimed Facebook’s ad delivery system violates California’s Unruh Civil Rights Act by not providing women and older people equal access to insurance ads on its platform.

The trial court sustained Facebook’s demurrer, deciding Liapes didn’t plead sufficient facts to support her discrimination claims, but the California Court of Appeal, First Appellate District, Division Three, reversed the decision, saying Liapes did allege facts sufficient to state a cause of action.

Facebook requires users to disclose their age and gender before they can use the service, said the appellate court ruling, and its audience selection tool allowed insurance companies to target their ads based on certain characteristics, such as gender and age. Drop-down menus allowed insurance advertisers to “exclude protected categories of persons,” and insurance advertisers used Facebook’s tools to exclude protected categories of persons from seeing some advertisements,” it said, citing Vargas v. Facebook. In such an instance, Facebook “does not merely proliferate and disseminate content as a publisher,” it said, citing Fair Housing Council of San Fernando Valley v. Roommates.com: “It creates shapes, or develops content ‘by materially contributing’ to the content’s alleged unlawfulness.”

That third-party advertisers are the content providers “does not preclude Facebook ‘from also being an information content provider by helping develop at least in part’ the information at issue here, contrary to Facebook’s assertions," said the appellate court. It cited Roommates, saying the party responsible for putting information online may be subject to liability, even if the information originated with a user.

In its amicus letter to the California Supreme Court, NetChoice said the ruling presents a “troubling contraction of immunity under Section 230” and “seriously miscategorizes” the Unruh Civil Rights Act, which was designed to “prevent arbitrary discrimination against individuals.” Unruh “was not intended to and has never before been interpreted to stop consumers from receiving beneficial commercial information,” said NetChoice General Counsel Carl Szabo.

“This unprecedented opinion from the lower court would make California the only state to effectively ban advertisers from showing users relevant information online that would annihilate the free, personalized internet we all enjoy while further expanding the digital divide,” Szabo said. He cited diverse organizations -- a women’s prayer group and a seller of men’s orthopedic shoes -- that can reach their audiences more effectively online because of targeted advertising. If the lower court’s opinion stands, “Facebook and every other online ad network could be liable" under Unruh "for allowing targeting based on age and gender,” Szabo said.

Szabo’s four-point argument said targeted ads ensure users receive content that’s relevant to their stage in life and cultural context. “If advertisers on Instagram can no longer use demographic data, ads will become substantially less relevant and less welcome,” he said. Also, targeted online ads are an affordable way for small businesses to reach customers, he said. Reducing advertising to targeted and niche markets would “negatively impact content creation generally” and then small content creators including bloggers and artists “might struggle to find advertisers willing to sponsor their content,” he said.

Last, the ruling could “harm the consumers it seeks to protect” by “undermining the economic model that supports free and low-cost online services," Szabo said: "Californians might have to pay for more services and content that used to be free, or deal with a significant increase in non-targeted ads to make up for the lower efficiency." The appeals court’s ruling would lead to “a less personalized online experience, higher costs for small businesses, and a less vibrant and innovative online marketplace,” he said.

NetChoice also submitted a depublication request to California Chief Justice Patricia Guerrero and the California Supreme Court for the opinion, requesting that if the Supreme Court denies review of the case, that the judgment be removed from California’s official reports, “preventing the dramatic consequences of the opinion.”