An urgent report to government which revealed Facebook and Google were refusing to budge on paying Australian media companies for content sparked the sudden decision to impose a mandatory code on the digital giants last week.

The Australian Competition and Consumer Commission report, requested in mid-April by the government, will not be made public and has superseded what was to be a public progress report on code negotiations to be delivered in May 2020.

The competition watchdog told the government the digital platforms were dragging their heels on three issues and a resolution was unlikely, prompting it to bring forward the imposition of a mandatory code, sources told Guardian Australia.

Negotiations had stalled over the media’s access to data and notice of ranking changes but the overriding sticking point was Google and Facebook’s stonewalling on payment for content, the ACCC told the government.

The government, which wants a code to ensure more transparency over the newsfeed algorithms and ad placement around news media, initially ordered Facebook and Google to negotiate with local media businesses on a voluntary code of conduct by November.

But in early April News Corp Australasia executive chairman Michael Miller indicated the voluntary process ordered by the government last year was not working when he said he met with the digital platforms but had not even got to “first base” in discussions.

“The government should be ready to institute a mandatory code,” he said.

The ACCC’s report backed up Miller’s view and advised the government the voluntary discussions would not reach a conclusion on how Australian media businesses would be remunerated for the use of their content.

Last week, treasurer Josh Frydenberg said Facebook and Google would be forced to share advertising revenue with Australian media companies and instructed the competition watchdog to develop the mandatory code of conduct.

The competition watchdog is now drafting a code and setting up “intensive bilateral discussions” with all parties before issuing a draft at the end of July.

The commission has also held discussions with the French government – where the competition regulator has ordered Google to negotiate with publishers – and other jurisdictions where the power of the digital giants is being challenged.

“The world is watching Australia,” a source said after several so far unsuccessful attempts to make Google and Facebook pay for news media content in Europe.

Facebook has said it is disappointed by the acceleration of the timeline and Google’s Australian managing director, Melanie Silva, this week expressed shock and accused the government of moving the goalposts by bringing forward a mandatory code.

“I think had we submitted the report and then had a response that it wasn’t really good enough, then that would have been a bit different, but to shift [the goalposts] before the delivery of that substantive report was a surprise,” she told Nine newspapers.

Silva did confirm that Google’s position was not focused on paying for content but on how the search giant can add value to media companies by sending traffic their way.

“I think a lot of the media coverage last week was around ‘pay pay pay,’ but the conversations that we had, in line with the government’s recommendations, were around value exchange,” she said.

The development of a code of conduct is part of the Morrison government’s response to the digital platforms inquiry final report to support a sustainable Australian media landscape in the digital age.

In its landmark digital platforms report in July the commission recommended a code of conduct to ensure news businesses on digital platforms are treated fairly and transparently.