Microsoft faces $7b fine in IE investigation

28 million Euro users affected by IE lock-in.

European Union regulators have threatened Microsoft with a $7 billion fine for failing to provide users with an alternative web browser choice other than its own Internet Explorer in certain verisons of Windows 7.

The software giant had failed to abide by a 2009 agreement with the union since February 2011, removing an option to choose between Internet Explorer, Google's Chrome, Apple's Safari, Opera and Mozilla's Firefox in a service pack update for the operating system.

European Commission competition commissioner, Joaquin Almunia, said Microsoft's actions affected up to 28 million customers that were not given that choice.

"We take compliance with our decisions very seriously," he told media overnight.

"And I trusted the company's reports were accurate. But it seems that was not the case, so we have immediately taken action.

"If the infringement is confirmed, there will be sanctions."

The company could ultimately be fined 10 percent of its $US74 billion ($AU71.7 billion) in annual revenues, or $7.4 billion.

It would be the second fine levelled at MIcrosoft in recent months after it failed in its bid to have a separate €899 million ($AU1.07 billion) antitrust fine from the Commission dismissed.

Almunia said Microsoft's actions — which the software giant has not denied — were the first time a legally binding agreement from the European Union had not been complied with.

Microsoft has sold a Europe-specific version of its operating systems since 2009 allowing users the choice of a default browser as part of the setup process.

But the company blamed a technical error for not delivering the browser choice screeen, or BCS.

"The BCS software has been delivered as it should have been to PCs running the original version of Windows 7, as well as the relevant versions of Windows XP and Windows Vista," the company said in a statement.

"However, while we believed when we filed our most recent compliance report in December 2011 that we were distributing the BCS software to all relevant PCs as required, we learned recently that we've missed serving the BCS software to the roughly 28 million PCs running Windows 7 SP1."

Microsoft apologised to the commission, saying it had "fallen short in our responsibility".

The agreement to allow alternative browser options in Microsoft operating systems is set to expire in 2014 but the company has offered to extend the compliance period for a further 15 months.