VW, Daimler and BMW supressed the development of emissions fighting technology, the EU competition regulator says.
The European Union has accused German carmakers of colluding together in a cartel in a bid to withhold technology aimed at reducing harmful emissions.
VW group (Volkswagen, Audi and Porsche), BMW and Daimler acted illegally by working together to delay introducing two emissions reducing technology, the European Commission said on Friday.
Findings from a preliminary inquiry concluded that all of them held a so-called “circle of five” meetings to rig competition in emissions technology.
"We are concerned that this is what happened in this case," said EU competition commissioner Margrethe Vestager on Friday.
“As a result, European consumers may have been denied the opportunity to buy cars with the best available technology”.
The Commission said that one of the technologies was made to filter emissions in petrol cars, while the other would have cut harmful nitrogen oxide emissions from diesel cars.
"Restricting competition on innovation for these two emission cleaning systems ... denied consumers the opportunity to buy less polluting cars," the EU competitions regulator said in a statement.
A BMW statement said it would earmark a sum "which is likely to exceed one billion euros" against potential fines, while adding that it "will contest the EU Commission's allegations with all legal means if necessary."
A spokeswoman from Daimler, which makes Mercedes-Benz cars, told news agency AFP the firm was aware of the report but had already been cooperating with investigators and "does not expect to receive a fine in this matter".
Volksawgen’s VW Group said it would not comment until a later date.
It is unclear as to what the punishment could be, but it is likely that a large fine could be slapped onto the carmakers accused of collusion.
Daimler was given a €2.93 billion fine in 2016 for 14 years of collusion over fixed prices.
Germany’s car makers have taken a reputational hit after the 2015 Volkswagen emissions scandal, in which the firm admitted to rigging millions of diesel cars to cheat emissions tests.