Software giant faces EU competition fine

Microsoft will be fined hundreds of millions of euros by the European Commission and could be forced to sell versions of its Windows operating system with rival media-playing programs included, after talks between the two sides broke down yesterday.

Despite the intervention of Microsoft's chief executive, Steve Ballmer, who flew to Europe for talks with the EU Competition Commissioner, Mario Monti, the sides said they could not agree on "commitments for future conduct".

Microsoft said it would appeal against the decision - a process that could take years.

At the same time, the EU is also expected to tell Microsoft to reveal details about how its larger server computers communicate with its desktop machines. Windows dominates the desktop, with more than 90 per cent market share, and the EU believes it is using that effective monopoly to muscle its way into the server market.

Microsoft was accused of shutting out rivals by including its own Media Player software in Windows, rather than requiring users to download it, as they must for rival products. Microsoft responded that the bundling benefited consumers.

The draft decision will go to the full European Commission next Wednesday, where it is expected to be approved.

Mr Monti said it was "impossible to achieve a satisfactory result in terms of setting a precedent."

He added: "In the end I had to ... decide what was best for competition and consumers in Europe. I believe competition and consumers will be better served with a decision that creates a strong precedent ... that will set clear principles for the future conduct of a company with such a strong, dominant position in the market."

Microsoft's chief counsel, Brad Smith, said the talks broke down over the EU's attempt to regulate future behaviour.