In a preliminary ruling, the European Commission told Microsoft that linking Internet Explorer to its dominant Windows operating system violates EC rules.
The EC's ruling was triggered by a complaint from IE rival Opera. Microsoft could seek to offer a Windows version without IE, as it did in the EC's 2004 ruling on Windows Media Player.
The EC said that tie shields Microsoft from head-to-head competition with rival Web browsers.
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The EU released a statement Friday stating, Microsoft's tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice.
The commission noted last week that Internet Explorer is available on 90 percent of the world's PCs. Citing the evidence it has gathered to date, the EC said tying Internet Explorer with Windows distorts competition on the merits between competing Web browsers insofar as it provides Internet Explorer with an artificial distribution advantage which other Web browsers are unable to match.