A review that accompanies Lord Carter's Digital Britain says there is 'broad concern among stakeholders about the potential impact on commercial publishers of local authority publications'.
It states that the increasing occurrences of local authorities taking paid advertising in their publications as opposed to the advertisements running in local newspapers is having an 'adverse impact' on local media.
'Clearly, if such advertising grows to the extent that, coupled with the other pressures on local commercial media, it renders them unviable, that would be against the public interest,' states the report.
'While local authority information sheets can serve a useful purpose for local residents and businesses, they will inevitably not be as rigorous in holding local institutions to account as independent local media.'
The Audit Commission is undertaking an inquiry into the prevalence of council newspapers.