Crunch Time for Microsoft in Battle With European Commission

The European commission stepped closer to imposing $5m (£2.7m) a day fines on Microsoft yesterday when it gave the software group eight days to comply with sanctions imposed last year.

Neelie Kroes, competition commissioner, said in Madrid: "The deadline is the end of this month and if it's not met then it's the end of the game. We made a deal that before the end of the month we would reach an agreement. We are waiting for the Microsoft people to do their homework."

The two sides have engaged in brinkmanship manoeuvres since Ms Kroes's predecessor, Mario Monti, fined Microsoft a record €497m (£330m) in March 2004 for breaching anti-trust laws. He also demanded that the group offer a version of its Windows operating system without its MediaPlayer audio-visual system and share some of the secret protocols behind Windows with rival makers of servers.

A Microsoft appeal against those twin sanctions was turned down by the court of first instance, Europe's second highest court, last December. Since then the two sides have been engaged in endless discussions about how to implement the "remedies". Ms Kroes, a Dutch Liberal, who said she had agreed the end of May deadline in talks last month with Steve Ballmer, Microsoft's chief executive, said it was "premature" to say fines amounting to 5% of the group's daily turnover would be imposed immediately from June 1.

But her officials suggested that a decision to open procedures for fining the company for non-compliance could follow swiftly if there was no breakthrough in the next week. Commission officials have privately accused the group of deliberately stalling during these protracted talks, including on a commitment to nominate a trustee to monitor its compliance.

Microsoft, which originally promised to offer a version of Windows without MediaPlayer by February and to reach a licensing deal with rivals on interoperability by March, said it was working hard to reach agreement on full compliance with the decision.

The group has failed to satisfy Ms Kroes and her officials that the version of Windows on offer is the best technically available. Disputes continue about the price it wants to charge rival operators for licensing its software protocols, with the commission convinced it wants to price competitors out of the market.