Two weeks ago the Federal Government released a draft code of conduct for digital platforms and Australian media businesses that would make internet heavyweights Facebook and Google pay for the privilege of hosting Australian news.

The Government and the Australian Competition and Consumer Commission (ACCC), which was responsible for developing the code, have now disputed the warning the search giant issued in response.

Treasurer Josh Frydenberg will have the power to determine which digital platforms are impacted, but has said Google and Facebook will be first.

In the letter, Google Australia and New Zealand managing director Mel Silva said the code would severely impact Google and its subsidiary YouTube.

"A proposed law, the News Media Bargaining Code, would force us to provide you with a dramatically worse Google Search and YouTube, could lead to your data being handed over to big news businesses, and would put the free services you use at risk in Australia," the letter said.

"The law would force us to give an unfair advantage to one group of businesses — news media businesses — over everyone else who has a website, YouTube channel or small business.

"The proposed changes are not fair and they mean that Google Search results and YouTube will be worse for you."

A similar letter was addressed to Australian YouTube creators by YouTube Asia Pacific boss Gautam Anand.

The letter was promoted to some users on the Google homepage this morning. Similar promotions will be made on YouTube tomorrow.

But a number of the letter's assertions were challenged by the ACCC.

"The open letter published by Google today contains misinformation about the draft News Media Bargaining Code," the commission said in a statement.

"Google will not be required to charge Australians for the use of its free services such as Google Search and YouTube unless it chooses to do so.

"Google will not be required to share any additional user data with Australian news businesses unless it chooses to do so."

The principle underpinning the draft code is that there is a power imbalance between media companies in Australia and the tech giants that host their content.

Under the draft code, Google and Facebook would be required to negotiate with for-profit media businesses in good faith to come to an agreement where they pay for news content hosted on their platforms.

If an agreement could not be reached, the negotiations would go to arbitration, where each party would put forward an offer and an independent arbiter would make a binding decision as to what went ahead.

The code would also require Google and Facebook to give advance notice of any changes to their algorithms that could impact how news content was displayed.

It would also set a standard for how Google and Facebook shared data relating to how users accessed news content.

"The Government is consulting on the implementation of a mandatory code to govern relationships between the parties, increase competition, strengthen consumer protection and ensure the sustainability of our media landscape," Mr Frydenberg said.

"The Government remains committed to introducing this significant reform with a world-leading mandatory code."

Facebook has previously been critical of the plans, and Ms Silva's letter ends by foreshadowing further action from Google in coming days.

The draft code is open for public consultation until August 28.