The Confederation of British Industry (CBI) has claimed that the EU's plans to reform data protection regulations in Europe will stifle innovation and restrict businesses.
The lobbying group was responding to the Ministry of Justice's Call for Evidence on the European Commission's data protection proposals.
It said that the proposed regulation will threaten many innovative business models, which rely on data sharing to generate revenue.
It also stated that the new regulations if enforced will place an additional burden of cost on firms to comply, some of which is likely to be passed on to consumers.
Matthew Fell, CBI director for competitive markets, said that the reforms will place European firms at a disadvantage with those outside the EU, who won't have to worry about compliance.
"We're concerned that the EC's proposed data protection reforms will put European businesses at a competitive disadvantage in a global market, by placing restrictive controls and high cost-burdens on innovation and investment.
"Many novel business models rely on data sharing to generate revenue and offer a more individually-tailored user experience. Advertising and subscription-based online music-sharing services are a good example, where we've recently seen ground-breaking innovation through partnerships with social networking sites."
He explained that some innovative business models rely on sharing information about copyrighted material, but not actually the material itself.
"Sharing information about music likes and dislikes online, without sharing the actual content, means millions more customers can now legally enjoy listening to music online – a lifeline for the flagging music industry.
"It's innovative businesses like these, on and offline, which will be threatened by restrictive controls on data-sharing proposed by the EC, while the cost of compliance will burden all industries, deter investment, and ultimately be passed on to consumers."
Fell added that by stifling this innovation, the EU will also be hampering Europe's chances of pulling itself out of economic stagnation.
"Since innovation is a key driver of economic growth, it's vital that governments here and in Europe support cutting-edge businesses to continue to innovate, before they get left behind by the rest of the world."