The European Commission has given its strongest indication yet that it plans to punish Microsoft for abusing its monopoly position.

"At this stage, in spite of Microsoft's claim that what they do is to the benefit of consumers and innovation, I am not sure that… their market behaviour ensures a competitive scenario," said European Commissioner for Competition Mario
Monti in Washington DC last week.

The Commission "will soon be in a position" to take legal action based on a second investigation, a Commission source said yesterday, speaking on condition of anonymity. The Commission is unlikely to issue proceedings before the end of this month, the source said.

This was in response to the EC's anticompetition case opened last August. That investigation was sparked by a complaint from Microsoft archrival Sun in 1998, which claimed Windows systems for PCs prior to Windows 2000 were designed to favour Microsoft server software.

If the Commission rules against Microsoft, it can fine the company up to 10 percent of annual global sales. Microsoft made sales of just under $23 billion in 1999.

The second investigation began in February 2000 and is almost identical in substance to the Sun case, but was initiated by the Commission itself. It focuses on whether Microsoft is using its dominance with Windows 2000 to muscle out other players in the server market.

Lawyers close to the Commission said that an early conclusion to the second investigation makes the merging of the cases more likely. Many say the EC's competition law arm is already planning to merge them. Doing so would allow a quicker conclusion than conducting two separate lawsuits, they say.

Theoretically, two separate cases would allow the Commission to fine up to 10 percent twice over. But Brussels lawyers said that it cannot be assumed that two fines would be larger than one.