Microsoft Faces Brussels Fine

Microsoft suffered its bloodiest ever mauling at the hands of the European commission yesterday when it was told it faced a stiff fine for alleged anti-competitive behaviour and will be forced to make sweeping changes to its ubiquitous Windows software.

Brandishing what it called "very impressive" new evidence of alleged sharp practices, the commission announced it was on the verge of completing its four-year investigation into Microsoft and said it was convinced competition abuses were "still ongoing".

It also said publicly for the first time that it may well fine Microsoft over the matter.

The commission has the power to punish companies in this way and can levy up to 10% of their global turnover, a potentially enormous sum for a company that earns more than $30bn a year.

Asked when it might act, a spokesman said in "a matter of months".

"We have to be quick enough to make an impact on the market," he added.

The commission confirmed it had been looking at two main allegations against the world's largest software company and claimed that recent inquiries had served only to bolster and further substantiate its initial concerns.

One of the commission's allegations is that the company has deliberately designed its Windows 2000 software to function better with Microsoft servers in order to encourage corporate customers to chose them over rival products.

To make matters worse, it contends that Microsoft has withheld vital technical information in order to prevent competitors making their own servers equally inter-operable.

Its second major concern is that Microsoft's decision to "bundle" its Media Player software with Windows gives the company an unfair advantage over competitors such as Apple and Real Networks in the growing market for online music and video software.

Using unusually robust language, an EC spokesman said: "The results of this inquiry are very impressive and very substantial and it would be at the company's and at their lawyers' peril not to take this very seriously. I would almost say that the case we have now is too strong for the company to ignore.

"We are ready to make a final decision."

The commission had sent Microsoft a definitive statement of objections, he said, and had provisionally decided that the firm would have to make sweeping changes to Windows. These changes would include an obligation for Microsoft to disclose the relevant technical information that would allow its competitors, such as Oracle and Sun Microsystems, to compete in the server market as well as forcing the company to market a version of Windows without Media Player or even with a rival's product.

"[This] gives Microsoft a last opportunity to comment before the commission concludes the case," said Mario Monti, the European Union's competition commissioner. "We are determined to ensure that the final outcome of this case is to the benefit of innovation and consumers alike."

Microsoft, which has one last chance to defend itself, was swift to react.

Describing the commission's move as "unfortunate", Microsoft spokeswoman Tiffany Steckler declined, however, to say whether the firm would agree to make the required changes. "We will, of course, respond to the statement of objections ... and continue to focus our efforts on finding a positive resolution," she said.

"We take this very seriously and will work hard to maintain dialogue."