European Union court judges questioned Microsoft today about the company's contention that a landmark European Commission antitrust decision denied the software giant's right to compete and innovate.

The special 13-judge panel is weighing whether the commission, Europe's top competition regulator, was right to decide that Microsoft abused the dominance of its Windows operating system to elbow out competitors.

A ruling against the commission would curtail its power as Europe's competition watchdog and would allow Microsoft to pursue the business practices that have helped it become a household name around the world. Microsoft is challenging that ruling, which imposed a €497m (about £345m) fine on the company.

On the second day of a five-day hearing, judges began their study of evidence concerning Microsoft's bundling of its Media Player with Windows - used by 95 percent of the world's PCs - which the commission said killed off consumers' incentive to buy other media-player software.

"Microsoft insists very strongly in this case that its operating system is... a product with media functionality that evolves and improves and expands with the evolution of technology," judge John Cooke said. "Am I correct... that you would say this is a single system?"

A Microsoft official replied: "You are correct."

Microsoft argues that consumers benefited from the improved operating system in which the media player was part of a natural evolution and that in contrast to the commission's predictions, competition in the industry is thriving.

On Monday, Microsoft's rivals presented memos exchanged by the company's top brass including founder Bill Gates, which, they said, showed it planned to crush the then top audiovisual software provider, RealNetworks, in the same way it had demolished internet browser provider Netscape.

"[RealNetworks] is like Netscape. The only difference is we have a chance to start this battle earlier in the game," one executive was quoted as saying in a memo sent after a meeting with Gates and others.

The memos overshadowed the presentations by the commission and Microsoft. Both called the other's arguments flawed and speculative.

On Wednesday and Thursday, judges will review the commission's action over what it says was Microsoft's failure to provide information rivals needed to create software able to run with Windows as smoothly as Microsoft's own products.

Microsoft will argue that it has given plenty of server software information away and that providing more would infringe its intellectual property rights over innovations that it has worked hard to develop.

A decision in the case is not expected for months, possibly a year.