The Business Secretary is said to be making plans to clamp down on broadband users who illegally download online content.
It is thought that Lord Mandelson is keen to impose fines worth thousands of pounds on people who have shared files over the internet.
According to various media reports, a consultation document that has been commissioned to accompany the Digital Britain plan could include recommendations to come down hard on those who repeatedly download illegally.
The document looks set to be the basis for the Digital Economy Bill, which will form part of the Queen's Speech in the autumn.
If the legislation is approved, people who are in breach of the new laws could be fined up to £50,000.
The proposals have come under criticism from former digital engagement minister Tom Watson.
Writing in the Independent on Sunday, he said: "Not only do the sanctions ultimately risk criminalising a large proportion of UK citizens, but they also attach an unbearable regulatory burden on an emerging technology that has the power to transform society, with no guarantees at the end that our artists and our culture will get any richer."