Shares in the top three German carmakers dropped sharply on Monday after it was reported that EU antitrust officials had started investigating a possible breach of regulatory standards.
Volkswagen, BMW and Daimler all slumped towards the bottom of the autos sector shortly after Monday's opening bell. BMW fell more than 2 percent while Volkswagen and Daimler slid over 3 percent on the news.
EU antitrust officials confirmed Saturday they had started investigating allegations of a cartel among a group of German carmakers.
"The European Commission and the Bundeskartellamt (German cartel office) have received information on this matter, which is currently being assessed by the commission. It is premature at this stage to speculate further," the European Commission said in a statement.
German news magazine, Der Spiegel, reported Friday that Volkswagen, Audi, BMW, Porsche and Daimler may have been engaged in industrial collusion. The major German carmakers were accused of using industry committees to agree on costs, suppliers, technologies and even the prices of diesel emission treatment systems.
BMW rejected reports of emissions collusion while other carmakers have reportedly refused to comment on the claims.
The commission is the EU's top antitrust agency in the EU, ensuring fair business dealings in the European market. While it has the power to force firms to change the way they do business, antitrust officials can also fine companies as much as 10 percent of their global turnover.
Germany's auto industry has been hit with billion euro fines both in Europe and the U.S. in recent years for cartels related to lighting systems, bearings and engine coolers. In July 2016, the Commission fined MAN, Volvo/Renault, Daimler, Inveco and DAF a total of 2.93 billion euros for forming a cartel and colluding on truck prices.
The automotive industry accounts for about 20 percent of Germany's industry revenue and employs approximately 800,000 people.