European antitrust enforcers may seek a massive fine from Microsoft Corp. and demand that it drop some features from its dominant Windows software, the Wall Street Journal reported in its online edition on Wednesday, citing a confidential European Commission document outlining its case. According to the report, the commission also alleged that Microsoft misled investigators and sought to obstruct the case. Any fine would be higher than it would have been if Microsoft cooperated, the document states, according to the report. The commission, the European Union's executive body, has authority to impose a fine of as much as 10 percent of Microsoft's annual revenue, or $2.5 billion, the report said.

The European investigation alleges that Microsoft illegally used its dominant Windows and Office software to muscle into the fast-growing market for corporate and Internet computer software, where it faces competition from Sun Microsystems Inc. , International Business Machines Corp. and others, according to the report. The newspaper said that the European investigation also alleges that Microsoft illegally sought to dominate music and video software for the Web. The commission alleged that Redmond, Washington-based Microsoft deliberately designed its Windows 2000 desktop software and companion products so that they wouldn't work well with rivals' software, the newspaper noted.

The investigation focused on the market for servers and alleged that Microsoft illegally bundled its Windows Media Player video software into Windows to shut out competition, the report said. The newspaper said the finding suggests the Europeans could seek changes in current and future software products to end the alleged violations. The commission also said bundling new features into Windows and Windows server software "has a chilling effect on innovation and competition," according to the report.