It comes as a report warned that news publishers face an ‘existential threat’ from dominant tech giants.
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A new competition regime designed to rein in the dominance and power of platforms such as Google and Facebook has been announced.
The Digital Markets Unit will attempt to give people more choice and control over their data, as well as ensuring businesses are fairly treated.
A statutory code of conduct could force platforms to be more transparent about the services they provide and how they are using consumers’ data.
The new unit – which will be set up within the Competition and Markets Authority (CMA) and co-ordinate with regulators including Ofcom and the Information Commissioner’s Office (ICO) – is set to begin work in April.
Powers to suspend, block and reverse decisions of tech giants, as well as the ability to order them to take certain actions to achieve compliance with the code, have been proposed, with the threat of financial penalties for failure to follow the rules.
“I’m unashamedly pro-tech and the services of digital platforms are positively transforming the economy – bringing huge benefits to businesses, consumers and society,” said Digital Secretary Oliver Dowden.
“But there is growing consensus in the UK and abroad that the concentration of power among a small number of tech companies is curtailing growth of the sector, reducing innovation and having negative impacts on the people and businesses that rely on them.
“It’s time to address that and unleash a new age of tech growth.”
Business Secretary Alok Sharma said: “Digital platforms like Google and Facebook make a significant contribution to our economy and play a massive role in our day-to-day lives – whether it’s helping us stay in touch with our loved ones, share creative content or access the latest news.
“But the dominance of just a few big tech companies is leading to less innovation, higher advertising prices and less choice and control for consumers.
“Our new, pro-competition regime for digital markets will ensure consumers have choice, and mean smaller firms aren’t pushed out.”
The code could be used to ensure platforms are not applying unfair terms, particularly on strained news publishers which have long lost out on a greater slice of digital advertising in the face of dominant tech giants.
It comes as the House of Lords Communications and Digital Committee warned that a “fundamental imbalance of power” between news publishers and platforms must be fixed to save journalism from an “existential threat”.
“Publishers need platforms far more than the platforms need them and are disadvantaged by a dysfunctional online advertising market,” said Lord Gilbert of Panteg.
“It’s essential that the Government acts swiftly to remedy this and sets up the Digital Markets Unit as a matter of urgency.”
Peers also urged the Government to give Ofcom greater powers to regulate public service broadcasters’ online news content, which is not currently covered under its remit, as well as ensuring it monitors the accuracy and impartiality of their journalists’ public social media posts.
Facebook is hoping to launch its Facebook News service in the UK very soon, in which the social network will pay publishers for content to appear on the site.
A spokesman for the company said: “We remain committed to working with our UK industry partners to find ways to support journalism and help the long-term sustainability of news organisations.
“Quality journalism is vital to society and we endeavour to be a part of the innovation the sector needs to thrive digitally.
“Many publishers choose to put content on our platforms because this gives their work a larger audience.
“We will continue building free products, making global investments and developing partnerships to support them.”
Ronan Harris, vice president at Google UK and Ireland, said: “Online tools have proved to be a lifeline during the pandemic and they can help create a digital, sustainable and inclusive recovery.
“We support an approach that benefits people, businesses and society and we look forward to working constructively with the Digital Markets Unit so that everyone can make the most of the internet.”