Concerns over Vista system

European antitrust regulators have expanded their investigation into Microsoft's Vista operating system, by raising concerns over plans to add encryption and handwriting recognition software to the group's new flagship product.

The concerns are based on complaints from small European software developers who fear the bundling of these new functions into Vista will undermine their products in this area.

It is understood that the European Commission raised these concerns in a letter to Microsoft in July. Vista, which is due to replace the group's ubiquitous Windows operating system from next year, is already at the centre of a new antitrust battle between the commission and Microsoft.

The Brussels-based regulator fears that Vista might raise the same competition problems that led the commission to issue a landmark ruling against Microsoft more than two years ago.

In particular, the regulator is concerned about the "bundling" of new features and programs into the operating system. Brussels fears the addition of an internet search engine and a range of software security features will undermine competition from companies which sell similar products on a stand-alone basis.

Microsoft said yesterday that handwriting recognition and encryption software would be included only in premium editions of Vista. These would cost more than the basic edition, thereby giving users a choice of programs from different vendors, the group added.

Though the commission has made public some of its concerns, it has not issued a formal ruling.

The conflict between Brussels and the software group has taken on a new edge over recent weeks after Microsoft complained that the legal uncertainty hanging over Vista could further delay its launch.

The company has also warned that the commission probe might force it to market Vista without crucial security features.

This criticism sparked an angry reaction from Neelie Kroes, the EU competition commissioner, who last week hit out at what she described as a "co-ordinated campaign" against the commission.

The latest concerns over Vista follow a string of complaints, and people familiar with the investigation say the volume of concerns might create problems for the regulator.

Should the regulator decide to bring new charges against Microsoft, it would have to narrow down its concerns to a small number of issues.