The European Commission is investigating contracts between Microsoft and European Internet service providers, Commission sources said yesterday. The sources, who said that any conclusions on the investigation were "months away", added that the Commission had been co-operating closely with United States anti-trust authorities regarding Microsoft's Internet practices.

The US Justice Department accused Microsoft of using its Windows "monopoly" to force computer makers to include the Microsoft Internet browser in pre-loaded software, putting rivals such as Netscape Communications, at a competitive disadvantage.

The Justice Department also asked a federal court to slap a $1 million-a-day (£681,000) fine on Microsoft for as long as the alleged violations continue.

The Commission has been examining similar practices in Europe on its own initiative but had received no complaints about Microsoft's incursion in the Internet. Its investigation is focusing on contracts with Internet service providers which have licences for Microsoft operating system software.

"It (Microsoft) cannot oblige licensees to also take a licence for another product," a source said.

The sources stressed that, under a 1994 undertaking given to the Commission by the US software firm, the company is allowed to develop products to be integrated in its operating systems. But it cannot force licensees to buy other products in return for getting its popular software licences.

This sort of practice could have the same effect as those at stake in the US investigation.

In the US, Microsoft was accused of forcing manufacturers to accept its Internet Explorer as a condition of receiving the company's Windows 95 software, which equips over 95 per cent PCs in the world.

The sources said the Commission was investigating a series of contracts and it would have to inform the company of its grievances, if any, before deciding whether to take any action.

The Commission sent the company based in Redmond, Washington, a statement of objections about six months ago about licensing agreements after it received a complaint. This examination, which is part of about a dozen Microsoft-related investigations in Europe, does not concern the Internet.

In the US, the Justice Department says Microsoft's tactics violate a 1995 anti-trust settlement.

Mr Bill Gates, Microsoft chairman and chief executive officer, said: "It would be a great disservice to our customers if Microsoft did not enhance Windows with Internet-related features, and rapidly distribute updated versions of Windows through PC manufacturers."