Microsoft has warned that if South Korean regulators order it to remove code or redesign Windows as part of an ongoing unfair competition investigation, it could pull the operating system from the market or delay the introduction of new versions.

The warning was relayed yesterday in a Microsoft regulatory filing with the US Securities and Exchange Commission. The company said it is possible that the KFTC (Korea Fair Trade Commission) - the country's antitrust body - could issue a remedial order barring a version of Windows that includes its Media Player or MSN Messenger software.

The KFTC's investigation started in 2001 after Daum Communications, a Korean company that runs a popular web portal and has its own messaging software, lodged a complaint. Daum alleges that Microsoft abused its dominant position in the operating system market by bundling its instant-messaging software with Windows, causing unspecified losses for the Korean company.

In October 2004, RealNetworks also filed a complaint with the commission concerning Microsoft's Media Player software and the option of having Windows Server included with Windows Media Services.

RealNetworks withdrew its complaint with the KFTC after it reached a broad legal settlement with Microsoft earlier this month, said Oliver Roll, Microsoft's general marketing manager for the Asia-Pacific region who is based in Singapore. Under the deal, Microsoft agreed to pay RealNetworks damages and cooperate on products and services in a package worth $761m (about £248m).

Despite the withdrawal of the RealNetworks complaint, the KFTC will continue to investigate the case, Roll said.
The Korean press reported earlier this week that Daum may be in settlement talks with Microsoft. However, the KFTC's proceedings will continue regardless of any settlement, said Kim Byung-bae, director general of the KFTC's Competition Bureau.

A Daum spokeswoman said on Friday that she could not comment on the reports of settlement talks.
The KFTC held a final hearing Wednesday and is now deliberating the case, but it's not known when the nine-member panel will come to a conclusion, Kim said. Microsoft expects a decision within a few weeks, Roll said.
Microsoft has stressed to the commission that Windows has benefited Korean consumers through the availability of more applications and lower costs, Roll said. The Windows operating system has about a 90 percent market share on PCs, he said.

"We are very hopeful we have presented some very strong arguments," he said.

Korean investigators closely watched the European Commission's decision last year against Microsoft that resulted in a $603m fine against the company. As part of the ruling that ended the five-year investigation, Microsoft was ordered to ship a version of its operating system that did not include Media Player.