Tech giants do not face enough competition and new laws are required to increase consumer choice in the digital sector, an independent review has found.
The report, which was commissioned by chancellor Philip Hammond, states tech firms have become increasingly dominant in the market, limiting the control consumers have over their personal data.
The review, published today, calls on the government to increase competition in the sector by setting up a new competition unit and strengthening outdated laws.
The new competition unit should develop a code of conduct for the largest digital companies and should be backed by legal powers to enforce new rules, it states.
The report also calls for changes to merger rules to ensure the Competition and Markets Authority (CMA) can clamp down on takeovers that could damage future competition and innovation.
Harvard professor and former Obama adviser Jason Furman, who chaired the review, said: “The digital sector has created substantial benefits but these have come at the cost of increasing dominance of a few companies which is limiting competition and consumer choice and innovation.
“Some say this is inevitable or even desirable. I think the UK can do better.”
The independent panel leading the review said the proposals would level the playing field and allow more companies to join the market, leading to the creation of new social media sites and online search platforms.
The greater choice would also give consumers greater control over their data by allowing them to switch providers more easily.
In addition, the review urges the CMA to launch an inquiry into the digital advertising market, which it states is dominated by two major players and suffers from a lack of transparency.
Chancellor Philip Hammond said: “I will carefully examine the proposals put forward by the panel before responding later this year, setting out how the government will implement the changes needed to ensure our digital markets are competitive and consumers get the level of choice they deserve.”
Matthew Fell, chief UK policy director of the CBI, said new rules must “keep pace” with the tech industry. Hammond is expected to make an initial response to the report in his Spring statement speech this afternoon.