Microsoft faces fines of up to €2 million (£1.36m) a day, after failing to comply with a European Commission ruling that found the company had broken competition rules.

In March 2004, the EC found that Microsoft, the largest software developer in the world, had broken competition rules by unfairly bundling its dominant Windows PC operating system with server and media player products.

The EC fined Microsoft a record €497 million (£338m) and ordered it to market a version of Windows that did not include its Media Player software. Microsoft was also instructed to disclose by December 15 detailed technical documentation that would allow non-Microsoft servers to work with Microsoft products.

Microsoft has argued that doing so would infringe its intellectual property rights. However, an unyielding EC has said the company has five weeks to implement the measures or risk a daily fine of up to €2 million for non-compliance.

"I have given Microsoft every opportunity to comply with its obligations," Neelie Kroes, the EU Competition Commissioner, said.

"However, I have been left with no alternative other than to proceed via the formal route to ensure Microsoft’s compliance."

An official at Microsoft declined to give a reaction to the commission’s announcement.

The EU’s second-highest court gave its backing in Dec 2004 to the commission order to implement remedies, which Microsoft wanted suspended.

"It is now one year since the Court of First Instance confirmed that Microsoft had to comply with the remedies imposed by the March 2004 decision," Jonathan Todd, the commission spokesman for competition, said.

"The commission very much regrets that one year on, Microsoft has still failed to do so," he added.

Although Microsoft has insisted that it is cooperating, the dispute continues to drag on. Meanwhile, the commission has said it is looking into "informal complaints" against the group.

"We would have preferred obviously that Microsoft complied quickly as they indicated this time last year that they would," Mr Todd said.

"I would like to stress that we expect of course Microsoft to comply with the March 2004 decision and not with their own interpretation of the March 2004 decision."

If Microsoft remains defiant, the commission could decide to increase the daily fine.