The EU has fined Volkswagen and BMW EUR875m (GBP750m) after finding that the German carmakers colluded with another rival, the Mercedes-Benz owner Daimler, to delay emissions-cleaning technology.

The European Commission said that the carmakers had “breached EU antitrust rules by colluding on technical development in the area of nitrogen oxide cleaning”.

Volkswagen, the world’s largest manufacturer of cars, will pay EUR502m, a reduction of more than half the original fine because it cooperated with the investigation. BMW will pay EUR372m, far lower than the provision for well over EUR1bn that it had initially made. Daimler escaped without a fine because it had revealed the cartel to the commission.

The fines are the latest blow to the German car industry in relation to diesel pollution, after the “Dieselgate” cheating scandal, in which Volkswagen and Daimler were found to have added software, known as defeat devices, that during testing deliberately reduced emissions during testing of nitrogen oxides harmful to human health. Volkswagen and Daimler have both paid out billions of euros in fines and compensation.

The commission’s latest announcement said that the carmakers had also worked together over a period of five years to delay more efficient technology to remove nitrogen oxides by adding urea (a chemical found in mammals’ urine that is sold as “AdBlue”) to exhaust gases. While the process dramatically lowers diesel emissions, it lowers the performance of the engines.

Daimler, BMW and Volkswagen, plus VW’s Audi and Porsche brands, exchanged information on AdBlue tank sizes, meaning they did not have to worry about competing with each other on having cleaner engines, the commission said.

Margrethe Vestager, the commission’s powerful executive vice-president in charge of competition policy, said: “The five car manufacturers Daimler, BMW, Volkswagen, Audi and Porsche possessed the technology to reduce harmful emissions beyond what was legally required under EU emission standards.

“But they avoided competing on using this technology’s full potential to clean to higher standards than what is required by law.”

Volkswagen said it may appeal after reviewing the commission’s decision. A spokesperson said the commission was “breaking new legal ground” because the collusion was not related to pricing, and the contents of the talks were never implemented, meaning “customers were therefore never harmed”.

A Daimler spokesperson noted that the commission had not found any evidence of collusion in the use of prohibited defeat devices.

The diesel scandals have dragged on for years, overshadowing carmakers’ efforts to clean up their image as they gradually increase sales of electric cars with zero exhaust emissions, as part of efforts to reduce the carbon dioxide emissions from transport.

However, the carmakers have also fought a rearguard campaign to try to delay the end of sales of profitable internal combustion engine cars, including diesels. Petrol and diesel sales will be banned from 2035 in the UK, but the EU has not yet set a target date for a full ban.

“Carmakers cannot be trusted to clean up cars,” said Julia Poliscanova, senior director for vehicles and e-mobility at Transport & Environment, a Brussels-based campaign group. “First they cheated on emissions tests, then they colluded to delay cleaner vehicles even though they had the technology. Only an EU target to switch to 100% emissions-free cars by 2035 will be enough to decarbonise by mid-century and avoid climate catastrophe.”

BMW was contacted for comment.