The Civil Aviation Authority will examine whether companies are deliberately splitting up groups of passengers so they pay to sit together.
Research by the CAA suggested widespread confusion among passengers over airlines' approaches to allocating seats and what they may have to pay, if at all, to sit as a group.
UK travellers are paying between £160 million and £390 million a year for allocated seating, with most paying between £5 and £30 a seat.
The findings have prompted the regulator to launch a review of allocated seating practices, which will see airlines asked to provide information on their policies.
The CAA said it intends to find out whether consumers are being charged fairly and whether pricing policies are transparent.
Andrew Haines, chief executive of the regulator, warned it "will not hesitate to take any necessary enforcement action should it be required at the end of the review".
A survey of more than 4,000 people who had flown as a group in the last year found around a fifth did not pay to sit together and were separated from their group.
Meanwhile, almost half of people in the survey believed that their airline would automatically allocate them seats together.
Just over half of the respondents said the airline told them before booking that they would have to pay to guarantee they would sit together, while 10 per cent said they were told after booking.
A further 10 per cent said they were never made aware that they might have to pay more to sit together.
Mr Haines said: "Airline seating practices are clearly causing some confusion for consumers.
"Airlines are within their rights to charge for allocated seats, but if they do so it must be done in a fair, transparent way.
"Our research shows that some consumers are paying to sit together when, in fact, they might not need to.
"It also suggests that consumers have a better chance of being sat together for free with some airlines than with others.
"The research shows that it is the uncertainty around whether their group will be split up by the airline that is driving consumers to pay for an allocated seat."