EU gives Microsoft 'last chance' to reform

A long-running battle between the European commission and Microsoft today came to a head as the EU body unveiled measures it wants to impose on the software giant.

The commission, which has been investigating Bill Gates' company for four years, gave Microsoft a last chance to defend itself before demanding changes in the ubiquitous Windows operating system.

Citing recently collected information from businesses across Europe and the US, the commission said its "preliminary conclusion is that Microsoft's abuses are still ongoing".

The commission accused Microsoft of using its dominant position in PCs to gain advantage in low-end servers, computers that provide core services to PCs in corporate networks.

On media players, used to play sound and video on computers, the commission said that Microsoft had two alternatives. It could either sever the link between Windows Media Player from Windows by either offering a version of the operating system without Media Player, or it could agree to include competing media players with Windows.

"Both solutions seek to ensure that consumers have a fair choice as regards media players," the commission said.

Microsoft has indicated that it would take any negative ruling to the European court in Luxembourg, which has overturned a number of the commission's recent anti-trust decisions.

If the commission really decides to throw the book at Microsoft, it has the power to fine the group as much as 10% of the company's annual revenues, equivalent to about £1.7bn.

As Microsoft's battle with the EU reaches a climax, the company remains entangled in the aftermath of a landmark anti-trust lawsuit in the US that the company had settled. Last month, the state of Massachusetts said that it was investigating whether Microsoft had violated its anti-trust settlement with 18 other states and the federal government.

Massachusetts said it would look at allegations that the company retaliated against a computer maker for promoting the rival operating system, Linux.

Last month also saw the release of an official US government report in which justice department officials said that they "remain concerned" about the company's compliance with its anti-trust settlement with the government.

In a report to US district judge Colleen Kollar-Kotelly, anti-trust enforcers said that they were unhappy with Microsoft's planned rates and royalty structure as the firm prepares to share some of its secrets with competitors.

Under the terms of the settlement, Microsoft had agreed to offer its competitors "reasonable and non-discriminatory" terms of access to its secret codes to enable them to make software of their own that would be compatible with Windows, which has more than 90% of the PC operating systems market.