Google, Yahoo, eBay and Facebook have written to Lord Mandelson asking him to remove measures in the Digital Economy Bill, which they say could stifle innovation and derail the government's plans for Digital Britain.
On Wednesday, executives from the European divisions of the internet companies sent the business minister an open letter urging him to remove Clause 17 from the proposed law, which received its second reading in the House of Lords earlier the same day.
"We believe the bill's Clause 17 – which gives any future Secretary of State unprecedented and sweeping powers to amend the Copyright, Design and Patent Act – opens the way for arbitrary measures," the companies wrote. "This power could be used, for example, to introduce additional technical measures or increase monitoring of user data even where no illegal practice has taken place."
The clause, which has already attracted widespread criticism from digital rights activists, ISPs and consumer groups, would give Mandelson or any other nominated person power to amend copyright law as they saw fit, nominally in order to keep up with changes in technology.
The online companies say that this power will introduce business uncertainty and the potential for open-ended compliance costs to the UK's digital economy.
"This would discourage innovation, impose unnecessary costs, potentially unsettling the careful balance of responsibilities for enabling market change which Lord Carter outlined in the Digital Britain report," the letter said.
"This clause is so wide that it could put at risk legitimate consumer use of current technology as well as future developments... Clause 17 creates uncertainty for consumers and businesses and puts at risk the UK's leading position in a digital Europe. We urge you to remove Clause 17 from the bill," the companies wrote.
Responding to the criticism of the clause, the Department for Business, Innovation and Skills (BIS) said that the law must be drafted to include potential changes in technology, so that the government could take action if new ways of infringing copyright were developed.
"However, business will not wake up one morning to a world in which government has taken extensive digital powers," a BIS spokesperson said on Wednesday. "There are substantial constraints on how the power can be used, with requirements for a consultation and votes in both houses of Parliament before anything can happen. Also, the powers can not be used to create or modify a criminal offence."
The Digital Economy Bill was outlined in the Queen's Speech in November, and includes radio spectrum planning and video game classification alongside measures to counter file sharing. It includes 'three strikes' proposals, which would impose stringent data collection rules on ISPs and give Ofcom a central role in disconnecting users deemed to be in breach of intellectual property law.
The Bill had its first reading in the Lords on the 19 November. Now it has had its second reading in the Lords, it will go through committee and report stages prior to a third reading, before being introduced to the House of Commons.