Microsoft's legal problems escalated this week as European Union (EU) sources revealed that the company is being charged with obstructing justice in its EU antitrust case. Reportedly, the EU's executive body, the European Commission (EC), has warned Microsoft that the company obstructed the EU's investigation by willfully misleading the people who were looking into the charges against the company. The EC notified Microsoft of the offending behavior in a formal statement of objections it sent to the company in August. And among the company's alleged deceptive tactics was the presentation of more than 30 letters supporting Microsoft, purportedly written by other companies. The EU says that Microsoft either wrote those letters or the companies that wrote them weren't told how Microsoft planned to use the letters.

The EC has the authority to fine Microsoft up to 10 percent of its annual revenue for its antitrust violations in Europe, a figure that exceeds $2.5 billion. But according to sources, a massive fine might be the least of Microsoft's problems. The European trustbusters are apparently hoping to force the company to drop a significant number of features from various versions of Windows, including software for Internet browsing, music, and video. The original charges accuse Microsoft of using its Windows and Office dominance to muscle into other markets, including those for the Internet and multimedia. "Microsoft's product bundling has a chilling effect on innovation and competition," a leaked EC report about the case reportedly says.

However, EC Commissioner Mario Monti said yesterday that it's still too early to discuss fines or other plans of action. "I could not stress enough that the case is still at a preliminary stage," he said. "To speak of a fine when Microsoft has not yet disputed the Commission's preliminary findings both in fact and law--as is its right--is premature. But a fine is, of course, always a possibility." Monti noted that the EC has extended Microsoft's deadline for responding to the allegations. Originally, the company had until the end of October to reply; the new deadline is unknown.