Google and Facebook are transforming the way people communicate, access news and view advertising — and they are at risk of growing too powerful, according to Australia's consumer watchdog.

The Australian Competition and Consumer Commission (ACCC) has indicated the need for potential new regulations to stop major tech companies from abusing their power to the detriment of Australia's media and digital advertising industries.

In a preliminary report released today, it put forth 11 recommendations to improve oversight of the tech giants and prevent them from engaging in potentially discriminatory conduct.

The watchdog has recommended that a new or existing regulatory authority be given the task of investigating, monitoring and reporting on how large digital platforms rank and display advertisements and news content.

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The ACCC says there is a lack of transparency around the algorithms used to rank and display ads and news content which gives Google and Facebook the ability and incentive to favour related businesses or businesses they have an existing commercial relationship with.

It also includes a proposal, albeit an unlikely one to achieve, that would stop Google's internet Chrome browser being installed as a default internet browser on mobile devices, computers and tables; and Google's search engine being installed as a default search engine on internet browsers.

The ACCC believes the dominance of platforms like Google and Facebook justifies a greater level of regulatory oversight.

"Australian law does not prohibit a business from possessing significant market power or using its efficiencies or skills to 'out compete' its rivals," ACCC chairman Rod Sims said.

"But when their dominant position is at risk of creating competitive or consumer harm, governments should stay ahead of the game and act to protect consumers and businesses through regulation."

The decline of traditional media has seen digital platform grow exponentially in the past decade. Digital advertising has increased substantially in Australia in recent years, rising from less than A$1 billion ($1.04b) in 2005 to almost A$8b in 2017.

Google and Facebook — who derive a vast majority of their revenue from advertising — have captured 80 per cent of that growth in the Australian market.

Journalism in decline

The ACCC's inquiry, which was originally prompted by former Senator Nick Xenophon, comes at the behest of new outlets and digital advertisers who have seen their industry heavily disrupted by the Silicon Valley companies.

The inquiry is looking at the broader social implications of the rise of digital platforms, such as issues of algorithm-driven news distribution and fake news.

Other important issues being looked at include consumer awareness about the extensive amount of personal information collected by the likes of Google and Facebook, as well as consumer concerns regarding the privacy of their data.

"It is important that governments and the public are aware of, and understand, the implications of the operation of these digital platforms, their business models and their market power," the report says.

As the commission points out, Google has substantial market power in online search, search advertising and news referral while Facebook has substantial market power in social media, display advertising and online news referral.

According to Australian census data, from 2006 to 2016, the number of people in journalism-related occupations fell by 9 per cent. Sims noted the social impact of a decline in the number of journalists in the age of digital media.

"News and journalism perform a critical role in society. The downturn in advertising revenue has led to a cut in the number of journalists over the past decade. This has implications across society because of the important role the media plays in exposing corruption and holding governments, companies, powerful individuals and institutions to account," he said.

The ACCC's preliminary view is that consumers are at risk of getting less reliable news from these digital platforms and to only see this news through filter bubbles, or echo chambers.

User privacy and data collection

Research commissioned as part of the inquiry indicates consumers are concerned about the extent and range of information collected by digital platforms.

The ACCC is in particular concerned about the length, complexity and ambiguity of online terms of service and privacy policies, including click-wrap agreements with take-it-or-leave-it terms.

It has warned that without adequate information and with limited choice, consumers will be unable to make informed decisions, and this can both harm consumers and impede competition.

Other preliminary recommendations suggest ways to strengthen merger laws, deal with copyright, take-down orders, a review of existing, disparate media regulations and changes to the Privacy Act to ensure consumers make informed decisions.

The ACCC is further considering a recommendation for a specific code of practice for digital platforms' data collection to better inform consumers and improve their bargaining power.

"The inquiry has also uncovered some concerns that certain digital platforms have breached competition or consumer laws, and the ACCC is currently investigating five such allegations to determine if enforcement action is warranted," Sims said.

The ACCC is seeking feedback on its preliminary recommendations, and the eight proposed areas for further analysis and assessment.

These eight areas include the proposed 'badging' by digital platforms of media content, produced by an accountable media business, as well as options to fund the production of news and journalism, such as tax deductions or subsidies, a digital platforms ombudsman to investigate complaints and provide a timely and cost effective means to resolve disputes, and a proposal for digital platforms to allow consumers to opt out of targeted advertising.

Further stakeholder forums may be held in early 2019.