The European Commission, the antitrust regulator of the European Union, will decide whether to fine Microsoft up to 5 percent of its daily global turnover in "several weeks" starting from 1 June.
In March 2004, the Commission imposed a series of measures on the company for abuse of the dominant market position of its Windows PC operating software. The Commission has given Microsoft until midnight on 31 May to say how it intends to comply with those measures, according to Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes.
The Commission will then take "several weeks to analyse what Microsoft has come up with," Todd said. "We will have to assess carefully if it is sufficient to ensure compliance."
The Commission will "insist on compliance with every part of its original ruling," he added.
In 2004, the Commission ordered Microsoft to offer a version of Windows without its own-brand Windows Media Player (WMP) installed, and to offer licensing terms for the communications protocols used by its workgroup server software. It also hit the company with a fine of €497m, (£337m) the largest ever imposed in the EU's history of antitrust rulings.
In order to comply with the Commission's ruling, Microsoft has proposed to sell a version of Windows without WMP called "Windows XP N".
The question of licensing terms for the communications protocols remains one of the major sticking points between the two sides. The company is insisting that developers who take out a licence pay a fee for every product they sell using Microsoft's protocols. But developers argue this is impossible to predict in advance and are insisting on a flat rate, one-off fee.
"We are working hard with the Commission towards an agreement on compliance with the decision," said a Microsoft spokesman.
If Microsoft does not offer a satisfactory solution on the range of compliance issues, the Commission can launch a process to impose a fine worth 5 percent of the company's daily global turnover, or roughly £2.75m. The decision would have to be notified to the company, which would have a certain period to respond.
Kroes would also have to consult with the 25 member states of the European Union and seek approval from all 25 members of the Commission. This process is expected to take weeks.