Microsoft could face $3bn fine

The European Commission has warned Microsoft that it faces a fine of up to $3bn (£1.86bn) unless it agrees to modify its anti-competitive behaviour.

But analysts says the chance of the software giant being forced to pay up are slim.

Europe's Competition Commissioner Mario Monti is investigating Microsoft on two counts - the bundling of Windows Media Player with its PC operating system, and whether the company's dominance in the desktop market restricts fair competition in low-end server sales.

A preliminary report, which indicated that Microsoft was still abusing its market position, called for the supplier to make it easier for rival server vendors to interface with Windows, and to either unbundle Media Player or offer rival products with its operating system.

The Commission has the power to fine companies up to 10 per cent of their global turnover. For Microsoft, that is potentially a fine of $3bn, but it is unlikely to be so high.

But analysts are sceptical about the impact and likelihood of a fine on the software giant.

'The signs are that, despite early rhetoric, the outcome of the Commission's action will be comparable to that of the Department of Justice in the US: a very public and costly exercise in closing the stable door after the horse has bolted,' said Gary Barnett, IT research director at analyst Ovum.

'The Commission's tougher stance is part of a well rehearsed game that regulators and vendors play in the course of resolving antitrust issues. Microsoft will probably be relieved that the European Union's complaint hasn't changed substantially, and over the coming months there will be plenty of horse-trading before the deal is finally done,' he said.

Microsoft says it will examine the report thoroughly with a view to responding according to the official timelines.

'We will not speculate on possible outcomes or the suggested remedies, and continue to focus our efforts on responding to the Commission's concerns,' said Horacio Gutierrez, director of legal and corporate affairs for Microsoft in Europe.

'Microsoft takes this investigation very seriously, and continues to work hard to maintain a dialogue that will allow positive resolution to the Commission's concerns.'