Google and Facebook are among a group of net heavyweights taking the French government to court this week.
The legal challenge has been brought by The French Association of Internet Community Services (ASIC) and relates to government plans to keep web users' personal data for a year.
The case will be heard by the State Council, France's highest judicial body.
More than 20 firms are involved, including eBay and Dailymotion.
The law obliges a range of e-commerce sites, video and music services and webmail providers to keep a host of data on customers.
This includes users' full names, postal addresses, telephone numbers and passwords. The data must be handed over to the authorities if demanded.
Police, the fraud office, customs, tax and social security bodies will all have the right of access.
ASIC head Benoit Tabaka believes that the data law is unnecessarily draconian. "Several elements are problematic," he said.
"For instance, there was no consultation with the European Commission. Our companies are based in several European countries.
"Our activities target many national markets, so it is clear that we need a common approach," said Mr Tabaka.
ASIC also thinks that passwords should not be collected and warned that retaining them could have security implications.
"This is a shocking measure," added Mr Tabaka.
The main aim of the legal challenge, which will be launched later this week, is to see the law cancelled.
Both Facebook and Google have run into privacy-related problems in the past.
Facebook was forced to overhaul its privacy settings following criticism that they were too complex.
Google was criticised for lack of privacy in its Buzz social network, which it linked to Gmail accounts without seeking prior permission from users.
The search giant eventually agreed to submit to annual privacy audits as part of a settlement reached over the controversy.
France took tough action against Google when it accidentally collected personal data during the setting up of its Street View service.
The French privacy watchdog, CNIL, was one of the only bodies to fine the company. The £87,000 fine was the largest ever handed out by CNIL.