The competition watchdog has called for new fines and the threat of break-ups for tech giants with dominant positions in the advertising space.

According to the Competition and Markets Authority (CMA), UK expenditure on digital advertising was around £14 billion in 2019, with 80% of it going to Facebook and Google.

Google makes up more than 90% share of the £7.3 billion search advertising market in the UK, while Facebook has a share of over 50% of the £5.5 billion display advertising market.

“What we have found is concerning – if the market power of these firms goes unchecked, people and businesses will lose out,” Andrea Coscelli, CMA chief executive, warned.

“People will carry on handing over more of their personal data than necessary, a lack of competition could mean higher prices for goods and services bought online and we could all miss out on the benefits of the next innovative digital platform.”

The watchdog is concerned by the amount of power the pair have due to their large user base, making it impossible for rivals to compete on equal terms.

To reduce their power, it wants a new pro-competition regulatory regime in place, backed by a code of conduct to ensure such platforms do not engage in exploitative or exclusionary practices, with the threat of fines.

Our clear recommendation to government is that a new pro-competitive regulatory regime be established to address the concerns we have identified and regulate a sector which is central to all our lives

A year-long examination concluded that both companies had “unmatchable” access to user data, allowing them to target advertisements.

It also said they used default settings to nudge people into using their services and giving up their data.

The CMA warned that such dominance was also having an impact on newspapers and other publishers’ revenues, leaving them reliant on Google and Facebook for almost 40% of all visits to their sites.

It said a Digital Markets Unit should be able to order Google to open up its click and query data to rival search engines so they could improve algorithms and compete fairly, and restrict the firm’s ability to secure its place as the default search engine on mobile devices and browsers.

The report recommends that firms be faced with operational or ownership separation if necessary, naming Google’s publisher ad server function as an area where such a break-up should take place.

Meanwhile, Facebook should be made to increase its interoperability with other social networks – for activities such as cross-posting or finding friends – as well as offering users a choice over whether to receive personalised advertising.

“Our clear recommendation to government is that a new pro-competitive regulatory regime be established to address the concerns we have identified and regulate a sector which is central to all our lives,” Dr Coscelli added.

We support regulation that benefits people, businesses and society and we’ll continue to work constructively with regulatory authorities and government on these important areas so that everyone can make the most of the web

Facebook responded to the report saying it looked forward to engaging with UK government bodies on rules that protected consumers and helped small businesses rebuild as the British economy recovered.

“Providing a free service, funded by advertising that is relevant and useful, gives millions of people and businesses in the UK the opportunity to connect and share,” a spokesman said.

“We face significant competition from the likes of Google, Apple, Snap, Twitter and Amazon, as well as new entrants like TikTok, which keeps us on our toes.

“Giving people meaningful controls over how their data is collected and used is important, which is why we have introduced industry leading tools for people to control how their data is used to inform the ads they see.”

Ronan Harris, vice president for Google UK and Ireland, said: “Digital advertising helps businesses find customers and supports the websites that people know and love.

“Advertisers today choose from a wide range of platforms that compete with each other to deliver the most effective and innovative ad formats and products.

“We support regulation that benefits people, businesses and society and we’ll continue to work constructively with regulatory authorities and government on these important areas so that everyone can make the most of the web.”