The Digital Economy Bill, which was unveiled earlier this month and has been heavily backed by Lord Peter Mandelson, cover a number of issues including measures designed to tackle internet piracy, which will come into force next April.
The measures will see those suspected of illegal file-sharing issued with warning letters and emails. Repeat offenders will then will be put on a "serious infringers list", with ISPs expected to "exercise technical measures" that will involve cutting-off internet access.
Clause 17 in the Bill gives allows copyright law to be amended by the Secretary of State in a bid to keep up with technological advances.
"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 companies said in a letter to Lord Mandelson.
The group added the clause would discourage innovation" and "impose unnecessary costs".
"This clause is so wide that it could put at risk legitimate consumer use of current technology as well as future developments. We urge you to remove Clause 17 from the bill."
The Department for Business, Innovation and Skills (BIS) said the clause allows the government to act if illegal downloaders develop new ways of obtaining material in the future.
"Business will not wake up one morning to a world in which government has taken extensive digital powers," said the BIS.
"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."