An independent report into the dominance of online tech giants has called on the government to beef up the powers of regulators to scrutinise mergers and promote competition in the digital sector.

The independent report led by Jason Furman, a former economic adviser to Barack Obama, was commissioned by the UK Treasury to assess the impact on competition of large tech companies who have a monopoly over web users’ online data.

Amongst its key findings, the report said the increasing dominance of the likes of Google, Facebook and Amazon is “limiting competition and consumer choice and innovation” in the digital marketplace, and smaller firms should be given a chance to challenge them.

Furman, a professor at Harvard, and his co-authors recommended greater powers to limit “bullying tactics by market leaders” with greater enforcement powers for the Competition and Markets Authority (CMA), the UK’s competition watchdog, including the ability to block mergers that would reduce future competition.

However, he stopped short of a proposal put forward by US democratic senator Elizabeth Warren to break up the tech giants and impose harsher tax regimes. The report also comes after the EU scrapped plans to impose a digital tax on tech giants after several member states opposed the measure during months of talks.

In his spring statement today, the chancellor Philip Hammond is likely to double down on proposals for a UK-wide digital services tax. He has said the government would provide its own formal response to the Furman review later this year.

France also announced last week that it would roll out at a three per cent levy on tech giants with revenues over €750m.

The report also recommended that the CMA conduct a review of the digital advertising market, which is currently dominated by two large players, to improve consumer choice.

The panel of authors called for a “digital markets unit” to set and enforce the rules of fair play in the digital marketplace, which should be drawn up as a code of conduct.

The report also recommended that individuals should be given more control over their personal data.

The report stated: "Regulators’ existing powers for tackling illegal anti-competitive practices need to be strengthened – making it quicker and simpler to prosecute breaches, such as bullying tactics by market leaders."

Professor Furman, chair of the independent 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.”

He added that he thought the UK could “do better,” when it comes to injecting competition into the data-driven digital marketplace.

Philip Hammond, Chancellor of the Exchequer, said: “Competition is fundamental to ensuring the market works in the interest of consumers, but we know some tech giants are still accumulating too much power, preventing smaller businesses from entering the market.

“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.”

Responding to the report, Damian Collins MP, chair of the Digital, Culture, Media and Sport Committee, said: “It is clear that a strong code of ethics is needed to regulate online platforms, and I agree with the report’s conclusion that the proposed code of competitive conduct is complementary with the code of ethics suggested by my Committee.

“We welcome the measures put forward to tackle anti-competitive practices and bullying tactics by market leaders. This comes at a critical moment ahead of the beginnings of regulation from Government to rein in the powers of the tech companies.”

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