Microsoft CEO Steve Ballmer met the European Union's competition commissioner, Neelie Kroes, on Tuesday to discuss the company's failure until now to fully comply with the EU's antitrust ruling against the firm in May 2004.

The meeting took place on Tuesday evening and lasted for about one hour, according to Kroes' spokesman, Jonathan Todd. He said that Kroes made it clear that the European Commission, which is the EU's executive body, expected Microsoft to comply with its ruling "urgently and in full",

He warned that unless the company complied to the Commission's satisfaction it would be "obliged to take formal steps" to ensure compliance, explaining that the Commission was entitled to fine the firm 5 percent of its global daily runover for every day it failed to comply.

The Commission, which is responsible for enforcing EU competiton policy, in March last year ordered Microsoft to offer a version of the Windows PC operating system without its own Windows Media Player and to ensure interoperability with its workgroup server software by publishing its communications protocols under fair licensing terms. The firm was also asked to pay a fine of €497m (£337m).

The company is still not complying with its ruling despite the fact that the initial decision was taken in 2004, Todd said. "It's more than a year since the Commission decision and we're not in a position to say that Microsoft has complied," Todd said.

Asked what the outstanding areas of disagreement between the Commission and Microsoft were, he listed the requirement to provide a "fully functional version of Windows without Media Player" and the requirement to ensure interoperability with its servers.

Todd implied, however, that a disagreement over the role of a monitoring trustee to oversee the company's continuing compliance with the ruling had been resolved. When quizzed if the issue of the monitoring trustee had been settled, the spokesman said: "This is not regarded as a major outstanding issue."

The Commission had objected to limitations Microsoft had suggested on the range of issues the trustee, an independent third party, could examine, saying that the company's request amounted to an effective veto over the trustee's activities.

Microsoft has proposed to supply a version of Windows without Media Player called "Windows N." The Commission is still considering whether this version and accompanying literature and promotional material would be as attractive to customers as the classic version with the player.

The Commission has not yet accepted the licensing terms Microsoft has proposed for companies who want to obtain communications protocols for its workgroup servers. Groups like the Free Software Foundation Europe have complained that some of the terms discriminate against programmers who use open source software.

A spokesman for Microsoft, Tom Brookes, said that the meeting was "part of an ongoing dialogue" between the two sides.

The Commission spokesman added that the meeting had been arranged at short notice at Microsoft's request.

By contrast, when Microsoft chairman Bill Gates visited Brussels in February he did not see Kroes although he did meet the Commission President José Manuel Barroso and a number of members of the European Parliament.