Australia's consumer watchdog has called on the Federal Government to take action to rein in the market dominance of Facebook and Google in Australia, including strengthening the Privacy Act and giving Australians greater power over how their information is collected and used.

Key points: The ACCC wants the Federal Government to rein in Facebook and Google's market dominance

The ACCC wants the Federal Government to rein in Facebook and Google's market dominance The Federal Government will respond by year's end, after a consultation period

The Federal Government will respond by year's end, after a consultation period Treasurer Josh Frydenberg has said Australian consumers need better protection and regulation that is "fit for purpose"

Treasurer Josh Frydenberg said he accepted the ACCC's overarching finding that there is a need for reform, but that the Federal Government would not provide its final response to the report until the end of the year, after a consultation period.

"Make no mistake, these companies are among the most powerful and valuable in the world," he said.

"They need to be held to account and their activities need to be more transparent."

The Australian Competition and Consumer Commission (ACCC) recommends in its Digital Platforms Inquiry final report that unfair contract terms be made illegal and the Privacy Act strengthened.

In the wake of the Cambridge Analytica scandal involving Facebook, it also recommends a Code of Practice for digital platforms that would give Australians greater transparency and control over how their personal information is collected, used and disclosed by digital platforms.

The 600-page report also recommends that merger laws be updated and that the ACCC establish a new digital markets branch with information gathering powers to provide regular reports to the Government.

A spokesman for Google Australia said the company will continue to engage with the Federal Government on the report's recommendations.

"The final report examines important topics in relation to Australia's changing media and advertising industry and we have engaged closely with the ACCC throughout the process," he said.

Managing director of Facebook Australia and New Zealand, Will Easton, said the company had worked with the ACCC over the past 18 months, and remained "fully committed to engaging in the consultation process around this report".

"It is important to get the rules for digital news distribution right, as they could impact the 16 million Australians who use our services to connect, share, and build community, as well as the hundreds of thousands of small businesses that use our free tools to grow, thrive, and create jobs," he said.

ACCC chairman Rod Sims said a new digital markets brand within the ACCC could take "some millions of dollars" to set up, and hoped the government would grant the watchdog greater information gathering powers to uncover misleading or anti-competitive behaviour.

"Not only can we help action in Australia but I think we will play an important role in having more coordinated action right around the world," he said.

Five investigations underway into Facebook, Google

The ACCC's preliminary report, which was released in December, found that Google and Facebook had "substantial market power", but stopped short of calling for a break up of the media giants.

The preliminary report had flagged significant penalties if the companies breached privacy laws, and Mr Sims said at the time that five investigations underway into misuse of market power by digital players, which arose from the inquiry.

In its final report, the ACCC said it expects to conclude these specific investigations into Facebook and Google later in the year, and will not make further comment until that time.

But the report noted that once the ACCC has formed a view, "given the nature of the issues being investigated, the potential impact on the significant numbers of Australian consumers who use Google and Facebook's services and the significant industry and community interest in the matters being considered in the Inquiry, the ACCC considers it to be in the public interest to disclose these investigations".

Each month, about 19.2 million Australians use Google Search, 17.3 million access Facebook, 17.6 million watch YouTube (which is owned by Google) and 11.2 million access Instagram (which is owned by Facebook).

The final report recommends codes of conduct be developed to govern the relationship between Google and Facebook and media businesses, which would require regulatory sign off.

The ACCC's final report comes as the US Justice Department this week announced that it is opening a major antitrust review into technology companies, including Facebook, Google, Amazon and Apple.

The review, which is the latest development in the US Government's scrutiny of its home-grown tech giants, will examine their market power and whether it is a threat to competition.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 3 minutes 14 seconds 3 m 14 s Elysse speaks to Nassim Khadem about Google and Facebook's taxes. ( Elysse Morgan )

'Disconnect' between consumers and tech giants

The report makes 23 recommendations in total, and notes "there is a substantial disconnect between how consumers think their data should be treated and how it is actually treated".

It suggests changes to search engine and internet browser defaults. It recommends Google provide Australian users of Android devices with the same options being rolled out to existing Android users in Europe — the ability to choose their default search engine and default internet browser from a number of options.

"If Google does not introduce similar options for Australian Android users by six months from the date of the report, the ACCC will submit to the Government that it should consider compelling Google to offer this choice."

It also suggests consumer protections in the Privacy Act be strengthened to capture greater digital data and that companies clearly set out how the entity will collect, use and disclose the consumer's personal information, and get consent before obtaining it.

This means that any settings for data practices relying on consent must be pre-selected to 'off'. It suggests that if the company gets a request from a consumer to erase their data, that this must be done without any delay or ambiguity.

It suggests giving individuals a direct right to bring actions and class actions against entities in court to seek compensation for an interference with their privacy under the Privacy Act, and higher penalties for breaches.

Review privacy regime, bring in new code

The ACCC also recommends broader reform of Australia's privacy regime, including considering "protections or standards for de-identification, anonymisation and pseudonymisation of personal information" as digital analytics becomes more advanced. This review could also consider setting up third-party certification.

The report also recommends the Office of the Australian Information Commissioner develop an enforceable code to regulate platforms' use of data.

This code would give consumers specific opt-in and opt-out controls, including when their personal information gets collected for online profiling purposes or shared with third parties for targeted advertising purposes. It would also include mechanisms for consumers to make complaints.

In addition, the report suggests an ombudsman scheme should be set up to resolve complaints and disputes with digital platform providers.

The Telecommunications Industry Ombudsman chairman Michael Lavarch welcomed the suggestion to have a specific digital platforms ombudsman.

It takes on board a call by the Australian Law Reform Commission (ALRC) to introduce a "statutory tort for serious invasions of privacy", and also suggests amending the Competition and Consumer Act so that unfair contract terms are prohibited (not just voidable).

Media companies 'enthused' by report's recommendations

Other recommendations in the report included taxpayer funding for journalism and media literacy organisations, and making donations to not-for-profit organisations engaging in public-interest journalism tax-deductible.

Mr Frydenberg pointed out that Google and Facebook are hoovering up 61 per cent of online advertising revenue between them, despite sourcing much of their content from media organisations.

"In the words of the ACCC, there is an imbalance of bargaining power between Google and media businesses and between Facebook and media businesses," he told reporters at a press conference.

"Whether it be print, radio or television, content generated by journalists and owned by media companies is being displayed on social media and search engines, often without a negotiated agreement covering how data and content is monetised and shared.

"What the ACCC recommend is that codes of conduct be developed to govern the relationship between Google and Facebook and media businesses. These codes of conduct would require regulatory sign off."

Nine chief executive Hugh Marks said the ACCC's report was comprehensive and the was "enthused by what we've seen so far".

But Digital Industry Group Inc (DIGI) managing director Sunita Bose urged the Government to assess the ACCC's recommendations against an innovation test, "to ensure they don't bring unintended consequences".