Microsoft, the world’s largest software maker, has threatened to withdraw its Windows operating system from South Korea if the country’s anti-trust watchdog orders it to remove programming for its instant messenger and media player.

South Korea’s Fair Trade Commission has been looking into Microsoft’s business practices since 2001, when Daum Communications, a leading local portal, lodged a complaint that Microsoft’s bundling of its messenger service into the Windows operating system breached anti-trust rules.

The KFTC broadened its investigation last year after RealNetworks, a US multimedia software company, accused Microsoft of tying its media player into its operating system, which allegedly hurt rival multimedia software companies.

Microsoft said the KFTC, which has been conducting hearings since July, could bar the company from offering a version of Windows in Korea that included media or instant messenger technologies. Alternatively, the commission could prohibit Microsoft from offering Windows Server with Windows Media Services as an optional component.

“If the KFTC enters an order requiring Microsoft to remove code or redesign Windows uniquely for the Korean market, it might be necessary to withdraw Windows from the Korean market or delay offering new versions in Korea, unless the remedial order is stayed or overturned on appeal,” Microsoft said in a filing to the Securities and Exchange Commission.

The KFTC said it would continue investigating the case, regardless of Microsoft’s stance. “No matter what Microsoft says, we will continue our deliberation. We will hold another plenary session next Wednesday,” a KFTC spokesman said, adding that a ruling could be made as early as next week.

He said the KFTC could order Microsoft to correct its business practices and fine the US company, if it rules that Microsoft breached anti-trust rules. Microsoft could be fined up to 2 per cent of its revenue made in South Korea for the period during which it violated fair trade rules.

The KFTC also was continuing its probe into the RealNetworks case, although Microsoft reached a $761m settlement with the software company earlier this month.

Microsoft said it would continue to cooperate with the KFTC until it reaches a conclusion and said it was “open” to any out-of-court settlement in its dispute with Daum.

The European Commission ruled last year that Microsoft violated anti-trust law by illegally tying its Media Player software to the Windows operating system and forced the software company to release a version of Windows stripped of the media player.

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