The European Commission said overnight it has reached a preliminary conclusion that Microsoft breached its commitment to provide Windows users with a choice of web browsers.
In 2009, the commission accepted a legally-binding commitment from Microsoft to set up a screen in the Windows operating system that allowed users to select which browser they wanted to use as default.
Microsoft agreed to keep the screen in Windows for five years until July 2014.
Due to a technical error, the screen disappeared in Service Pack 1 for Windows 7 in February last year, something Microsoft acknowledges. It was not reinstated until July this year, drawing the commission's ire.
The commission filed a formal complaint with Microsoft, sending a statement of objections following proceedings which commenced in July, commission vice president Joaquín Almunia said.
The EC is concerned that tying Internet Explorer with Windows limits consumer choice and competition.
Almunia has raised the possibility of penalties and warned that the commission has the power to impose fines, if commitments are not scrupulously complied with.
In July this year, Almunia threatened Microsoft with a massive sanction of up to 10 percent of the company's annual turnover or $7.2 billion, for breaching its browser choice commitment.
Microsoft now has four weeks to respond to the commission's letter.
"Let me restate a basic principle of our competition rules: if companies enter into commitments, they must do what they have committed to do or face the consequences," Almunia said.
The browser choice commitment also covers Windows 8, to be launched this week.
"Based on our own monitoring, we have raised issues to Microsoft relating to Windows 8, which is to be released soon," he said.
"If a user decides to set a rival browser as the default browser, there should not be unnecessary warning windows or confirmations by the user, and the Internet Explorer icon should also be unpinned from the Start screen.
"We expect Microsoft to address these issues."