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European antitrust regulators have expanded their probe 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 new concerns are based on complaints from small European software developers who fear the bundling of these new functions into Vista will undermine their own 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 standalone basis.

Microsoft said yesterday that handwriting recognition and encryption software would only 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 Redmond-based software group giant 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 earlier complaints, and people familiar with the investigation say that the sheer volume of concerns regarding Vista might create problems for the Brussels regulator.

They say it will be almost virtually impossible for the Commission to pursue all these complaints in formal antitrust probes.

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

While most observers expect the Commission to bring a new case on Vista, it is understood that the regulator has not decided which alleged abuses to pursue in more depth.

In March, Ms Kroes warned Microsoft over its plans to bundle an internet search engine, a fixed-document reader and security software into Vista.

The warning came only weeks after the Commission received a formal antitrust complaint against Vista from an alliance of technology groups including IBM, Nokia, Oracle and Sun.

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