Firms such as Facebook and Google may have to significantly rein in their use personal data if European Union lawmakers get the go-ahead to give users more control over their data.
In a report seen by Reuters, Jan Philipp Albrecht, a German member of the European Parliament, calls for the bloc build on a proposal announced by the European Commission last January for tougher data protection.
"Users must be informed about what happens with their data and they must be able to consciously agree to data processing - or reject it," he said.
Facebook and Google, who have profited from users' data by selling internet browsing habits to advertising companies, are fighting against these proposals.
"We are concerned that some aspects of the report do not support a flourishing European digital single market and the reality of innovation on the internet," Erika Mann, head of EU policy for Facebook, said.
Meanwhile, in November, Facebook was slammed by internet privacy groups for its plan to share data with Instagram in addition to loosening restrictions on who can email users with unsolicited material.
Instagram itself was left shell-shocked as users abandoned the photo-editing app, after it suggested in a set of new terms and conditions that it could sell users' photos to advertisers without prior consent of the user.
According to Reuters, US privacy advocates have estimated that a Facebook user can make $10 (£6.24) a year for the company by clicking on ads. But if the EU lawmakers' proposals are pushed through, the company may struggle further in its bid to monetise its business plan, as users shift from using PCs to smartphones and tablets. It had already been facing severe challenges in its desktop advertising model, prior to its initial public offering last May.
Albrecht concluded that to prevent firms such as Google and Facebook from compromising customer data, national authorities should be given the green light to levy fines ranging from 0.5 to two per cent of annual turnover of the firm in question.
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