Justice minister Bridget Prentice said that excessive costs and even the threat of them may force defendants to settle unwarranted claims.
The aim of the consultation is to ensure that costs are more proportionate and reasonable.
Meanwhile, Marcus Partington, chairman of the Media Lawyers Association, said the balance in the courts had swung too far in favour of personal privacy.
He said the United States was looking at passing laws to protect American citizens from UK judgments "because they think we do not do enough in this country to protect freedom of expression".
The Human Rights Act includes an entitlement to private and family life, but also a right to freedom of expression, and the Government consultation comes at a time when court rulings have been criticised for having a chilling effect in restricting the media.
Speaking to the Culture Media and Sport Committee's first evidence session into its Press Standards, Privacy and Libel inquiry, Mr Partington called for a greater control of charges that solicitors incur and seek recovery of.
He also spoke of the difficulties of defending online archives, as an article from 10 or 15 years ago could be downloaded and regarded as a fresh publication.
He said: "Because of the difficulty in defending it, the natural instinct is to remove it."
He highlighted the merits of the Press Complaints Commission (PCC) in pro-actively warning newspapers about stories.
"This sort of thing happens all the time but it maybe happens on a quiet behind-the-scenes level which is actually very effective," he said.
Asked if the PCC had been effective in the case of Kate Middleton, Mr Partington said that she was someone who did not seem to want publicity but who went to high profile nightclubs with lots of photographers.
But he emphasised he did not advocate any harassment of Miss Middleton.
The witnesses were also asked about so-called "libel tourism", where overseas citizens make claims against foreign media in British courts.
Mr Partington said he suspected that people came to London because it was seen as claimant-friendly.
He called for much greater consideration as to whether the claimant was properly connected to the country, the degree of publication and whether the British courts were an appropriate forum.
Keith Mathieson, of Reynolds Porter Chamberlain LLP Solicitors, told the select committee: "The media will always make mistakes. That is one of the products of a free society."
But he said that journalists work on the basis that what they are publishing is true.
But Mark Thomson, from Carter-Ruck Solicitors, said: "The practice at the moment is that Press standards have got worse and there are more victims.
"The media know this, sometimes it is too embarrassing...
"They do not want to go to court and face the full publicity of an action."
Asked about lawyers prolonging cases, he said: "No, most cases settle very quickly...
"We are all too busy to drag on a case, it's simply not worth it."
High Court judge Mr Justice Eady has dealt with a number of key cases involving privacy law, including Max Mosley's recent dispute with the News of the World.
The judge ruled that he had a reasonable expectation of privacy in relation to his sex life, and that the decision would not curb investigative journalism in the future.
In 2004, Saudi billionaire Khalid bin Mahfouz launched a libel action against author Rachel Ehrenfeld for claims in a book which was not even on sale in Britain.
But the judge awarded damages to bin Mahfouz because it had been available to buy in the UK via the internet.
Announcing today's proposals, Ms Prentice said: "We need to ensure that people's right to freedom of expression is not infringed, and media organisations continue to report on matters of public concern."
Measures under consideration by the Government consultation include:
:: Limiting recoverable hourly rates by setting either maximum or fixed recoverable rates.
:: Mandatory cost capping or mandatory consideration of cost capping in every case.
:: Requiring the proportionality of total costs to be considered on cost assessments conducted by the court.
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