The German government has approved fining online giants up to 50 million euros ($53 million) for failing to remove hate speech and fake news reported by users within a week.
Executives in companies such as Twitter and Facebook also face individual fines of up to five million euros should they fail to comply, the government announced in a statement.
Chancellor Angela Merkel’s cabinet stated: “Hate crimes that are not effectively combatted and prosecuted pose a great danger for the peaceful cohesion of a free, open and democratic society.”
Xenophobic hate speech has been on the rise in Germany since the arrival of some one million asylum seekers since 2015.
The government has repeatedly warned online companies to take steps to combat the spread of hate speech, and has called on them to better police the content being shared through their networks.
But Merkel's government decided on the tough action after determining that social network giants were not doing enough to erase content that ran afoul of German law.
Beyond hate speech and fake news, the draft legislation also covers other illegal content, including child pornography and terror-related activity.
The companies would have 24 hours to remove any posts that openly flout German law after they are flagged by users, while other offensive content would have to be deleted within seven days after it is reported.
Media groups also have to make it easier for users to report problematic posts, the government said, noting that it was pushed into action as “there is currently a massive change in the online discussion.”
“The culture of online debate is often aggressive, hurtful and hate-filled,” it said, adding “through hate crimes, anyone can be defamed because of his or her opinion, skin colour or origin, religion, gender or sexual orientation.”
The draft law stills require approval from parliament, which is dominated by Merkel's grand right-left coalition.