Volkswagen faces billions of dollars of fines in Australia if local cars are found to be involved in the global emissions-cheating scam.
The Australian Consumer and Competition Commission and government agents will meet with Volkswagen representatives on Friday to demand answers about whether its Australian cars are fitted out with pollution manipulating software.
Currently, there has been no confirmation from the carmaker about the impact of the scandal on the local market.
If `defeat devices' were to be found in local cars, Volkswagen will have violated consumer and safety standards under federal consumer law, ACCC chairman Rod Sims told AAP.
"We're at a very early stage because we all don't have information. There's a lot we don't know and we're approaching this with a very open mind," he said.
"But if we do find significant breaches, we won't hesitate to initiate court action."
That could involve fines of up to $1.1 million per breach of the law and binding court orders enforced on Volkswagen to ensure it complies with local standards.
"They could be for each vehicle, or for the advertising medium, there are various ways to come at it," he told AAP.
"There's no doubt that the penalties could be significant."
The ACCC has demanded Volkswagen hand over all marketing material to see if it may have mislead or deceived Australian car buyers, saying that claims about environmental benefits could influence consumer choice.
If the car giant fails to satisfy the ACCC at tomorrow's meeting, the watchdog would use its powers to forcibly retrieve details, Mr Sims said.
"At the end of the day if we can't get the information voluntarily then of course we can use our compulsory information notices," he said.
Volkswagen Australia did not directly respond to the ACCC's warnings.
"We are unable to provide a further update on Volkswagen Group Australia brands as we are still awaiting confirmation from our head office in relation to this market," a spokesperson said.
Since news of the scandal broke nearly a fortnight ago, Volkswagen Australia has been unable to say whether any vehicles in Australia are fitted with the dodgy software.
Mr Sims criticised Volkswagen's response over the past two weeks since to the situation in Australia so far as "frustrating" and "slow".
"What's been admitted in Europe is simply staggering so I think Australian customers and owners of these vehicles need information and they need it quickly," he said.
Volkswagen has admitted that 11 million of its diesel cars and 2.1 million Audis worldwide are fitted with engine devices that can cheat car emissions test.
The scam's fallout has left Volkswagen facing investigations in several countries, fines of up to $US18 billion and multiple customer lawsuits.
Meanwhile, consumer advocate Choice is campaigning for greater scrutiny of car manufacturers after tests found some cars used over 30 per cent more fuel per 100km than their manufacturers' claims.
"Self-regulation, as the VW scandal has shown, is not working," communications director Matt Levey said.
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