Car makers BMW, Daimler and Volkswagen plotted to put the brakes on the development of clean emission technology, the European Commission has alleged.
It said that as a result of the alleged collusion, European consumers may have been denied the chance to buy vehicles with the best available technology.
The German companies could face large fines as a result of the claims covering the period of 2006 to 2014.
The investigation centres on technical meetings held by the "circle of five" made up of BMW, Daimler, and Volkswagen's VW, Audi and Porsche brands.
Commissioner Margrethe Vestager said: "Companies can cooperate in many ways to improve the quality of their products.
"However, EU competition rules do not allow them to collude on exactly the opposite: not to improve their products, not to compete on quality.
"We are concerned that this is what happened and that Daimler, VW and BMW may have broken EU competition rules."
The European Commission's preliminary findings centred on systems designed to reduce nitrogen oxides from diesel car emissions, and "Otto" filters that reduce particulate matter emissions from petrol cars.
The commission said the case was not related to the other investigations into the use of illegal devices to cheat emissions tests and possible violations of environmental laws.
Daimler, which first alerted the regulator to the alleged behaviour, said it does not expect to be fined.
Volkswagen said it would examine the claims before making any further comment.
BMW said the EU was trying to equate lawful coordination between companies with unlawful cartel deals.
The European Commission has the power to levy fines of up to 10% of a company's global turnover.
It has sent a "statement of objections" to the companies giving them the chance to respond before a final decision.
The Commission did not say why the car makers might have wanted to block emissions cleaning technology, but such systems can add to costs.