updated 3/3/2006 12:38:58 PM ET 2006-03-03T17:38:58

Microsoft Corp. will be fined if it keeps up its current conduct, the EU's antitrust chief warned Thursday after the company accused the EU of withholding documents and colluding with Microsoft's rivals before filing charges last December.

"If we pursue the line we are following now, there will be fines and they won't be small fines," EU Competition Commissioner Neelie Kroes told Dow Jones Newswires.

The EU has threatened euro2 million ($2.4 million) in daily fines, backdated to Dec. 15, unless the company obeys a 2004 antitrust order to provide competitors with the information needed to make their software work with Microsoft servers.

Microsoft claims that it worked strenuously last autumn to meet the EU demands and that regulators kept shifting the goalposts — something the Commission firmly denies.

Speaking to Dutch business leaders in The Hague, Kroes said Microsoft could still plead its case in a Commission hearing on March 30 and 31 before the EU decides to impose fines.

"We will listen to Microsoft and their lawyers and after that we will reach a decision as soon as possible," she said.

Microsoft alleged Thursday that regulators had "inappropriate contacts" with rival companies and an independent monitor, Neil Barrett, known as the "trustee" _ which it said called into question the impartiality of Barrett's report.

The EU based its December charges largely on Barrett's views that the technical documentation Microsoft had supplied needed a drastic overhaul to be workable.

"These contacts call into question whether the reports ... are really independent, impartial assessments of Microsoft's technical documentation, or instead are argumentative tracts developed for the Commission with the assistance of Microsoft's competitors," said Horacio Gutierrez, Microsoft's associate general counsel in Europe.

The EU said it had no immediate comment on the content or admissibility of what it called Microsoft's "supplementary response" to the charges.

Microsoft said the Commission has held back documents — in particular correspondence between EU officials, Barrett, other experts and rival companies — that it believes is crucial to preparing its antitrust defense. "Microsoft is entitled to learn the full extent to which the Commission may have influenced the views expressed by the trustee," it said.

Gutierrez said correspondence between the Commission and four U.S. rivals that it received on Feb. 13 show that the Commission, the trustee, and Microsoft's adversaries were secretly collaborating throughout the fall of 2005 "in a manner inconsistent with the Commission's role as neutral regulator and the trustee's role as independent monitor."

The company said many of these contacts were not recorded in the antitrust case file and so were shielded from Microsoft's view.

Microsoft's lawyer wrote to the Commission last month to say it was aware EU officials were in contact with Sun Microsystems Inc., IBM Corp., Oracle Corp. and Novell Inc., all of which license the communications code at the heart of the dispute.

Microsoft claimed the Commission also facilitated secret meetings between Barrett and "another of Microsoft's adversaries" that it did not name, saying it offered to help Barrett fly to Texas for the meeting.

The software company also complained that this correspondence was supplied to it just two days before a deadline to respond to the EU charges — too late for it to give it proper consideration.

The EU levied a record $613 million fine against Microsoft in 2004. It also ordered the company to share code with rivals and offer a version of Windows without the Media Player software.

Microsoft is appealing the ruling and the case will be heard in April by the European Court of First Instance, the EU's second-highest court.

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