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The union reached a preliminary view that the company, which controls about three-quarters of the web browser market, prevented rival browsers from competing and had violated rules by abusing its dominant position.
Microsoft had eight weeks to reply to a "statement of objections" and was warned it may be fined if the union confirmed the preliminary findings.
The software giant has had to shell out more than $US1 billion ($1.5 billion) in fines to the commission in the past.
In its report, the executive wing of the union said it had reached a preliminary view that the bundling of Internet Explorer and Windows was anti-competitive.
"Microsoft's tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice," it said.
"If the preliminary views expressed in the statement of objection are confirmed, the Commission may impose a fine on Microsoft, require Microsoft to cease the abuse and impose a remedy that would restore genuine consumer choice and enable competition on the merits."
Microsoft and the EU have engaged in a running spat over competition issues for years.
The US company has been fined several times for allegedly abusing its 95 per cent dominance of personal computer systems through its ubiquitous Windows software.
"This case is about the future, about maintaining an open and dynamic internet," said Thomas Vinje, a Clifford Chance lawyer representing ECIS, a non-profit organization that promotes market conditions in the tech sector.
"Microsoft has achieved ubiquity for Internet Explorer. This ubiquity distorts competition and favours Microsoft's monopolies in ways completely unrelated to the merits of Microsoft's products."
Microsoft said in a separate statement that it was studying the Commission's views and did not rule out requesting a formal hearing.
It cited the Commission as saying that remedies put in place by US courts in 2002 after antitrust proceedings also did not make Windows-Explorer bundling lawful.
"We are committed to conducting our business in full compliance with European law," the company said.
In 1998 Microsoft was involved in a famous "antitrust" case after being sued by the US Department of Justice over its bundling of Internet Explorer with Windows.
The integration of the two products was a major factor in the demise of Microsoft's rival in the web browser market at the time, Netscape.
Microsoft's main rivals in the browser market today are Mozilla Firefox, Apple Safari and Google Chrome.
In September Google signalled a new round of "browser wars" by announcing it planned to poach "tens of millions" of users from rivals, but has yet to seriously threaten Microsoft.
"Most users don't recognise that there are things called 'browsers' which they have a choice in," said Google vice president of product management Sundar Pichai.
"Most people... just accept the one browser that is given to them."
I have one question, if you get rid of IE in Windows - how do you get Firefox?
People on IE stop using it!

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