Steve Ballmer met with the EU's competition commissioner, Neelie Kroes, yesterday to discuss the company's failure to comply with the EU anti-trust ruling.

The meeting took place yesterday evening and lasted an one hour, said Kroes' spokesman. Kroes reportedly made it clear that the European Commission (the EU's executive body) expected Microsoft to comply with its ruling "urgently and in full".

He warned that unless the company complied to the Commission's satisfaction it would be "obliged to take formal steps" to ensure compliance, explaining that the Commission was entitled to fine the firm five percent of its global daily trunover for every day it failed to comply.

The Commission ordered Microsoft in March last year to offer a version of Windows without its Media Player and ensure interoperability with its workgoup server by publishing its communications protocols under fair licensing terms. It was also fined 497 million euros.

The company is still not complying with its ruling despite the fact that the initial decision was taken in 2004, said a spokesman. "It's more than a year since the Commission decision and we're not in a position to say that Microsoft has complied."

Outstanding areas of disagreement are the requirement to provide a "fully functional version of Windows without Media Player" and the interoperability with its servers.

Disagreement over the role of a monitor to continuing compliance appears to have been resolved however. The Commission had objected to limitations Microsoft had suggested on the range of issues the trustee, an independent third party, could examine.

Microsoft has proposed to supply a version of Windows without Media Player called "Windows N". The Commission is still considering whether this version and accompanying literature and promotional material would be as attractive to customers as the classic version with the player.

The Commission has not yet accepted the licensing terms Microsoft has proposed for companies who want to obtain communications protocols for its workgroup servers. Groups like the Free Software Foundation Europe have complained that some of the terms discriminate against programmers who use open source software.

A spokesman for Microsoft said that the meeting was "part of an ongoing dialogue" between the two sides. The Commission spokesman added that the meeting had been arranged at short notice at Microsoft's request.