The "unreasonable" royalties composers and music publishers demand for digital downloads is being challenged.
The Alliance want more royalties for music sold online than on CD
The BPI - which represents more than 300 UK record labels - has joined seven online services to bring the action.
They have taken the Mechanical Copyright Protection Society (MCPS) and the Performing Right Society (PRS) to a copyright tribunal.
The MCPS and PRS want to charge more for songs downloaded from the internet than for those on CD.
The MCPS-PRS Alliance - who set and collect royalties on behalf of composers, songwriters and publishers - are proposing a tariff of 12% of gross retail revenues on most online music.
Currently, royalties on CDs stand at 6.5% of retail price, while broadcast radio rates are up to 5.25% of net advertising revenues.
But the BPI and the seven online services - AOL, Apple iTunes, MusicNet, Napster, RealNetworks, Sony Connect and Yahoo! - are challenging the tariff set by the Alliance.
BPI general counsel Geoff Taylor said: "The licence that the Alliance is trying to impose for online music is unreasonable and unsustainable. It is charging a royalty rate on a download that is double the rate it charges for a song on a CD.
"It applies this excessive rate to a whole range of online music services, without taking into account their different characteristics.
"The Alliance's tariff threatens to seriously harm the development of the legal online and mobile music markets."
Kenneth Steinthal of law firm Weil,Gotshal & Manges LLP, which represents the online services, said: "We are taking this step in an attempt to establish a licensing structure... while paying fairly for publishing without being placed at a severe competitive disadvantage relative to offline distribution of music and radio."
But the Alliance said it regretted the decision by the BPI and the online services to go to the UK Copyright Tribunal.
Adam Singer, Alliance CEO, said: "This is a disappointing tribunal reference... and one that could have been avoided.
"Industry observers must be baffled by record companies taking the publishing divisions of their own companies through a tribunal procedure, spending millions that neither side can afford.
"For a creative industry this demonstrates a complete lack of imagination."
The Alliance has suggested a temporary rate of 8% on downloads while the industry is still developing.