Google amalgamated 60 separate privacy policies into one document earlier this year (2012) - and now EU data protection commissioners feel the search giant is being too coy with its data collection.
The report suggests Google needs to give users more details about what information is being collected or face being in breach of EU data protection rules.
Google is likely to be given three to four months to implement changes before EU member states look to take action.
Whilst last year's amalgamation drew some criticism, as an umbrella policy now covers a range of Google products, including Google+ and YouTube, Google's also been in trouble for 'accidentally' snooping on private wi-fi connections with its Google Car, which was supposed to be taking close-up photographs for Street View, the maps feature, in the UK.
French data and privacy body CNIL led the latest investigation, on behalf of the EU member states, who claim data collected from YouTube, Android devices, Google+ and other services, could potentially be used to help the search engine target its advertising efforts without users knowing.
Whilst Google is not being accused of anything illegal by CNIL, the agency, having studied Google's latest policy, stated that it hasn't made any attempt to limit the "scope of collection and potential uses of personal data."
By doing this, Google could be in breach of a number of EU data protection regulations - something that is likely to cause concern amongst many Internet marketing professionals.
As well as advertising, CNIL highlighted that the data could be used by Google for product development, academic research and security purposes.
The report states that Google should provide users with information regarding the type of data it collects, and the reason why, in a clear manner.
It also proposes Google should allow users the opportunity to opt-out, and adapt its tools to limit the amount of data collected for authorised purposes.
Global privacy counsel for Google, Peter Fleischer, said: "We have received the report and are reviewing it now.