Drivers are being charged different prices online for the same car rental based on where they live in Europe, the European Commission has said.
Charges vary for some motorists, even if they are picking up the same vehicle from the same location and from the same hire company.
The Commission said that price discrimination based on residence broke the rules of the EU's single market.
The UK's car rental trade body said work was being done to get it right.
A spokesman for the British Vehicle Rental and Leasing Association (BVRLA) said: "We are actively working with our members to ensure they comply with the European Commission."
The Commission highlights one case in which a German driver searched online for a vehicle to hire in the UK. When the driver filled in Germany as country of residence, the price doubled.
In other cases, some consumers have been stopped from making a booking online after the website identified where they were located through their computer's IP address. This was owing to the website routing them to a country-specific site.
The Commission first raised concerns in 2011, and recently wrote to six international car rental companies, telling them to review their pricing policies.
It said that it had received an "unsatisfactory" reply from three companies - Europcar, Hertz and Avis. Consequently, it has made the letter public this week and has requested these companies conduct a full review by the end of the month.
A spokeswoman for Hertz said: "Hertz has already advised the Commission that it is fully compliant with its obligations under the Services Directive. Furthermore, Hertz has informed the Commission of its intention to further improve its online booking system to facilitate the ability of consumers to shop for the best deal across our websites by early September."
Avis also said it was, "to the very best of our knowledge... compliant with the relevant provisions of the Services Directive governing our industry.
"We have responded to all communications from the director general Internal Market and Services and twice invited him to discuss this further so that we can understand these allegations in greater detail. We are awaiting further information from the director general."
The Commission said that some companies were keeping to the non-discrimination principle, but it was not fully applied throughout the sector.
"The single market should be a daily reality, not only for major international companies, but also for consumers of Europe," said Michel Barnier, vice-president of the European Commission.
It also urged drivers to shop around for the best deals and called on EU member states to ensure consumers' rights were protected.
Rental and leasing of cars accounts for about 30,000 complaints (5.5%) made to the European Consumer Centres network, which deals with cross-border complaints.
The BVRLA estimates that the vehicle rental and leasing industry contributes £14.3bn to the UK economy. Ten million vehicles were hired in the UK last year.