The companies, Microsoft, Google, Yahoo and Cisco Systems, maintained that they are required to comply with the laws in any country where they do business.
Calling the companies role in China a "sickening collaboration, decapitating the voice of the dissidents," Rep. Chris Smith, R-N.J., said that American technology is enabling repressive regimes to exploit and abuse their citizens.
The Internet has "become a malicious tool: a cyber sledgehammer of repression of the government of China," Smith said at a joint hearing of the House Subcommittee on Africa, Global Human Rights and International Operations and the Subcommittee on Asia and the Pacific.
"For the sake of market share and profits, leading U.S. companies like Google, Yahoo, Cisco and Microsoft have compromised both the integrity of their product and their duties as responsible corporate citizens."
If Microsoft were to defy government directives in a country where it does business, it could face sanctions that could include the prosecution of employees and the end of it services in that country, said Jack Krumholz, managing director of Federal Government Affairs and associate general counsel at Microsoft.
"It is a well-established principle of international jurisdiction that global Internet companies have to follow the law in the countries where they provide services to local citizens," Krumholz said.
The notion that U.S. industry cooperation with Chinese authorities leaves the Chinese people better off, on balance, than objecting to the censorship policies, rubbed several lawmakers the wrong way.
"These companies need to do more than show virtual backbone. What Congress is looking for is real spine," said Rep. Tom Lantos, D-Calif.
"Your abhorrent activities in China are a disgrace. I simply dont understand how your corporate leadership sleeps at night."
China has imprisoned an estimated 49 cyber-dissidents and 32 journalists for posting information critical of the government.
One online writer, Shi Tao, was sentenced to 10 years in prison after authorities discovered his identity with the help of Yahoo.
Michael Callahan, general counsel at Yahoo, testified at the hearing that when Yahoo China was required to turn over the information about Shi Tao, the company had no information about the nature of the investigation.
"Indeed, we were unaware of the particular facts surrounding the case until the news story emerged," Callahan said.
"Law enforcement agencies in China, the United States and elsewhere typically do not explain to information technology companies or other businesses why they demand specific information regarding certain individuals."
Under a strategic partnership formed in October 2005, Yahoo merged its Yahoo China operation with a Chinese company, Alibaba.com, and Yahoo does not have day-to-day control over Yahoo China.