A former adviser to Barack Obama will examine whether big technology firms are affecting competition in the UK.
The Treasury said the dominance of a few powerful companies raised questions about competition and privacy.
Jason Furman will head a panel of experts looking at how the UK's digital market operates.
He said much of its work would be exploring whether the concentration of big players was stifling innovation in the UK.
Google and Facebook now dominate online advertising as consumers use their smartphones to order food, watch films and socialise online.
Meanwhile the growing popularity of online shopping has boosted the fortunes of firms such as Amazon and Ebay.
"There's no question some of major tech companies do enormous amounts of good and are beneficial to consumers and business in the UK - but that doesn't mean the status quo is the best we can do," Mr Furman told BBC Radio 4's Today programme.
The panel's conclusions, expected early next year, are likely to include policy recommendations over how to handle mergers in the sector and the control of personal data, as well as broader competition issues.
Mr Furman, former chief economic adviser to Mr Obama, said the review would also consider whether "big data" created barriers for smaller players and if artificial intelligence altered the way collusion took place between the big players.
Chancellor Philip Hammond said the UK was leading the way in the digital revolution, but it was right to ask how digital markets could be made to work for everyone.
Collection and use of data could offer big opportunities for UK business, the Treasury believes.
Data-driven technologies could offer ways to tackle traffic congestion, measure air quality, diagnose medical conditions and improve business productivity, the Treasury suggests, predicting the sector's value to the UK economy could reach £60bn a year by 2020.