Research of more than 4,000 passengers travelling in groups of two or more last year has revealed just over half were told before booking their flights they would need to pay to ensure they could sit together.
A further 10% said they were told after making the booking with another 10% saying they would need to pay more to guarantee seats together.
Nearly half of all respondents said they believed they would be allocated seats together having booked as a group.
While different airlines may have different policies, as many as six in 10 of those who paid to sit together did so over fears they could be split up.
Meanwhile, 46% of respondents said they felt negatively towards the airline after they realized they would have to pay more to sit together.
Now, in response to the report, the CAA is holding a consultation for consumers to find out their opinions on the matter.
Chief executive Andrew 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.
“Findings from our research show that UK consumers collectively may be paying between £160-390m per year for allocated seating.
"Of those paying, two-thirds spent between £5 and £30 per seat and a further 8% paid £30 or more. Our work will consider whether or not these charges are fair and transparent.
“As part of the review, we will be asking airlines to provide information on their policies and practices.
"We will be looking into how airlines decide where to seat passengers that have booked as part of a group and whether any airlines are pro-actively splitting up groups of passengers when, in fact, they could be sat together.
"We will not hesitate to take any necessary enforcement action should it be required at the end of the review.”
The CAA is also today publishing information that will help consumers travelling in groups to better understand their chances of sitting together without paying extra to do so.