The Competition and Markets Authority has made the recommendation after finding that the digital giants’ dominance of advertising markets is having a “profound” impact on news publishers.
The CMA has conducted a year-long examination of the markets which has found 80pc of the £14bn spent on digital advertising in the UK last year was earned by the two technology firms.
It found that Facebook now has a 50pc plus share of the digital display advertising market while Google controls more than 90pc of the search advertising market.
The report states: “Google and Facebook’s market positions also have a profound impact on newspapers and other publishers. The CMA has found that newspapers are reliant on Google and Facebook for almost 40pc of all visits to their sites.
“This dependency potentially squeezes their share of digital advertising revenues, undermining their ability to produce valuable content.”
The watchdog now wants the government to launch a ‘digital markets unit’ with the power to enforce a code of conduct to ensure that platforms with a position of market power, like Google and Facebook, do not engage in exploitative or exclusionary practices.
Among other things, the unit would have the power to:
- Enforce a code of conduct to ensure that platforms with a position of market power, like Google and Facebook, do not engage in exploitative or exclusionary practices, and to impose fines if necessary.
- Order Google to open up its click and query data to rival search engines to allow them to improve their algorithms so they can properly compete.
- Restrict Google’s ability to secure its place as the default search engine on mobile devices and browsers in order to introduce more choice for users.
- Order Facebook to give consumers a choice over whether to receive personalised advertising.
Welcoming the report’s findings, the News Media Association said: “The CMA has acknowledged and responded to many of the concerns of the News Media Association and the industry in this thoughtful report.
“We support the recommendations for a new regulatory regime for the tech platforms, a new code of conduct to govern their behaviour, and the establishment of a digital markets unit to enforce this code. We also note that a full market investigation has not been ruled out if progress is not made.
“We hope that the government will now act swiftly to implement these recommendations and restore balance to a digital ecosystem which for far too long has left news media publishers unable to realise the true value of their journalism.”
CMA chief executive Andrea Coscelli said: “Through our examination of this market, we have discovered how major online platforms like Google and Facebook operate and how they use digital advertising to fuel their business models.
“What we have found is concerning – if the market power of these firms goes unchecked, people and businesses will lose out.
“People will carry on handing over more of their personal data than necessary, a lack of competition could mean higher prices for goods and services bought online and we could all miss out on the benefits of the next innovative digital platform.
“Our clear recommendation to government is that a new pro-competitive regulatory regime be established to address the concerns we have identified and regulate a sector which is central to all our lives.”
A detailed assessment of the relationship between publishers and the two digital giants is set out in Appendix S of the CMA report.