A federal judge in U.S. District Court in Chicago has ruled that Craigslist is not responsible for openly discriminatory housing ads placed on its site by users. In the case of Chicago Lawyers' Committee for Civil Rights Under Law Inc. v. Craigslist Inc., No. 06C-0657 (N.D. Ill.), Judge Amy St. Eve upheld Craigslist's argument that it is not a "publisher" of housing ads, but merely a provider of online "interactive services," and therefore is not liable for the content of users' posts under the 1996 Communications Decency Act.

The plaintiff in the case, a Chicago-based civil rights group called Chicago Lawyers' Committee for Civil Rights Under Law, filed suit against Craigslist back in February. The suit alleged that posts made to Craigslist's housing board between the months of July and October, 2005 were openly discriminatory and thus were illegal under the 1968 Fair Housing Act. The posts at issue described very specifically who the posters did and did not want as tenants, with some posts explicitly excluding certain racial groups and others implicitly excluding everyone but a specific type of desired applicant.

The case has been closely watched by the tech industry and by civil liberties advocates. Back in June, a number of online companies, including Amazon, Google, and Yahoo, filed an amicus brief with the court on Craigslist's behalf. The EFF and eBay also supported Craigslist in the lawsuit. All of these parties were hoping for a solid legal precedent granting them blanket immunity from all liabilities resulting from the contents of users' posts.

The judge didn't quite grant the hoped-for latitude, ruling instead that Craigslist is only immune in its capacity as a publisher of third-party content. This implies that there may be some other, non-publisher capacity in which Craigslist could conceivably be found liable for the contents of users' posts.

Personal ads, bouncer exclusion, and information asymmetry

Before the passage of the Fair Housing Act, it was common to read classified ads for housing in which the landlord had quite explicitly stated, "colored [or Jews, or Italians, etc.] need not apply," or "whites only." The passage of the Fair Housing Act made it a crime for commercial landlords to exclude potential tenants or buyers based on race; this rule doesn't apply to smaller, non-commerical landlords (e.g., a little old lady who rents out a room in her house), who can exclude people based on whatever criteria they like. Subsequent case law that interprets the Fair Housing Act prohibits publishers from printing or airing openly exclusionary advertisements for property, with the result that nobody (not even a little old lady) can post a "whites only" classified ad in the paper. However, the ensuing history of real estate has seen the evolution of a variety of exclusionary tactics that work just as well, if not better, than the old "whites only" classifieds.

This past January, I attended the 2006 Coase Lecture at the University of Chicago's Law School. In the lecture, entitled "Information Asymmetries and the Rights to Exclude," Associate Professor Lior Strahilevitz described some of the legal history of discriminatory housing practices in the U.S. (You can get the podcast from the U of C law school faculty blog.) He identified three different types of exclusionary strategies that landlords have used to select the type(s) of tenants that they want for their property:

Bouncer's exclusion: The owner sets the selection effect in motion directly, using some mechanism (e.g., a bouncer posted at the door, or a racially restrictive zoning law) designed to weed out undesired tenants based on positive identification of who he does and does not want. This type of exclusion is what the courts have tended to restrict most severely, as in the case of the Fair Housing Act. Exclusionary vibes: Potential buyers or renters exclude themselves based on the way that the owner has decided to advertise the property (e.g., a billboard for downtown lofts that features a scantily clad woman holding a martini is not likely to attract Mormon couples). In case law that interprets the Fair Housing Act, the courts have moved to restrict some of these vibes. Most relevant for the Craigslist ruling is case law that prohibits "whites only"-type advertising, even in cases where the landlord might actually be allowed to exclude based on race or other arbitrary factors (e.g., a couple who rents a room in their house for the summer). Exclusionary amenities: The owner provides an amenity that causes a selection effect, because it functions like a tax on undesired groups. For instance, a condo owner's association that doesn't want single people buying condos might include a children's play area in the building, along with a mandatory monthly fee for maintaining it.

Strahilevitz argues that the most important distinction among these three types of exclusion is the amount of information that landlords and potential buyers/tenants either have or can cost-effectively obtain about each other. In other words, informational asymmetries—and the costs associated with overcoming those asymmetries—guide a landlord in selecting among these three, generally interchangeable exclusionary strategies.

Bouncer's exclusion presumes the absence of informational asymmetry in order to work. In other words, both the racist landlord and the would-be tenant must have equal access to an important piece of information governing the transaction, i.e., the race of the would-be tenant. Typically, a landlord would get such information about the tenant by means of an interview, either by phone or in-person, but such interviews aren't always economically feasible. This is especially true when the would-be tenant pool is very large, and the landlord's time is limited.

When cost and time constraints prohibit the use of bouncer's exclusion by making informational asymmetries impossible to overcome, Strahilevitz argues that landlords use options 2 and 3 (exclusionary vibes and exclusionary amenities) to move the burden of selection onto potential tenants or buyers. The kinds of small-time, non-commercial lessors that typically use free online services like Craigslist can't really afford to offer exclusionary amenities, so this leaves them with the exclusionary vibes option.

Now, this is where the Craigslist case becomes interesting. What I'd suggest is that the informational asymmetries inherent in mass-market online advertising venues make exclusionary vibes the most economical option for both lessors and large classified ad sites, at least right now. Or, in plain English, it's actually cheaper for online ad posters and sites like Craigslist to let jerks be themselves publicly, instead of forcing them to hide it until a potential renter shows up at the door.

If this is indeed the case, then not only will this issue not go away, but it's also just as much of a basic property rights issue as it is a "free speech vs. civil rights" issue. It also helps us clarify the interests of service providers like Craigslist in keeping this kind of language free from active policing.

Exclusionary vibes and large, online classified ad venues

Google, Yahoo, AOL, and others have a strong incentive to direct the most eyeballs possible toward their classified ads. So such online classified venues are the very opposite of the local niche paper, like "The Irish-American Times," in that they want to match the highest number of viewers with the highest number of ads. Because there is by design relatively little self-selection among the viewers of the Craigslist classifieds, the burden of narrowing the field of potential renters falls largely on the landlord.

A typical small-time lessor with a room to rent and very little time for personally screening a large applicant pool (i.e., bouncer's exclusion) will naturally want to move some of the burden of selection back onto the potential tenant pool. If she's advertising on a large, relatively diverse online venue like Craigslist, her only option is probably the emission of some form of (relatively unsophisticated) exclusionary vibes.

These exclusionary vibes, as odiously unsubtle as they may be, are currently the most practical, low-cost way for the small-time, amateur online classifieds user to exercise her basic right to exclude people from the use of her property. This is especially true if she wants to reach the largest pool of potential tenants by posting to a very diverse board like Craigslist. The other option for the racist lessor is a string of pointless meetings with people who she's not going to offer a lease to and who, if they had sufficient advance information about her racism, wouldn't have bothered responding to the ad anyway.

I'm not saying that I think it's ok to post a Craigslist housing ad that says, "whites only." Rather, I'm suggesting that the following factors make this kind of thing not only inevitable but actually desirable (from a cost perspective) to sites like Craigslist, Google, AOL, Yahoo, etc.:

The growing scale and reach of large online classified venues

The large informational asymmetry between landlords who post online ads and the users of such ads

The limitations of the text-based classifieds medium, which offers only one way to emit exclusionary vibes, i.e., explicitly exclusionary language

If the courts eventually follow the lead of newspaper classifieds and force online classified ad venues to restrict exclusionary language, then this would mean that landlords and real estate developers will be forced to find more novel ways to narrow the number of folks who respond to their ads. This will probably mean a move toward advertising on more niche-specific, exclusive sites, so that the site itself does most of the weeding out, instead of the ad. Craigslist doesn't want to see this happen, and neither do AOL, Google, or Yahoo.

Further reading