Advertisers that are not official sponsors of the Games but mention them in their ads could be served with injunctions and face unlimited fines under the London Olympics Bill going through Parliament. Critics of the Bill say that, in a break with legal precedent, advertisers would be presumed guilty.
Ministers came under strong pressure from Labour, Conservative and Liberal Democrat peers to water down the measure when it was discussed by the House of Lords. They have tabled amendments designed to safeguard the ad industry.
Lord Clement-Jones, a Lib Dem spokesman, said: "The ad industry is clearly opposed to ambush marketing, and it is certainly not in its interests, yet we believe this Bill will impact detrimentally on advertisers with no interest in falsely associating themselves with the games, as well as the wider advertising economy."
Lord Borrie, the chairman of the Advertising Standards Authority and a Labour peer, said the proposals were "disproportionate" and "objectionable".
He said MPs had gone much further than the International Olympic Committee's requirements.
But Lord Davies of Oldham, a government spokesman, denied it was creating a presumption of guilt and the suggestion advertisers would have to prove they were innocent of trying to cash in on the Olympics.
"We recognise the dangers of ambush marketing and that there has to be an appropriate procedure for the protection of the Olympic symbols and other aspects of advertising," he said.
Comment, page 64.