Microsoft's chances of settling its European anti-trust case are fading, as competition officials at the European Commission circulated a draft ruling to colleagues that finds the company guilty of abusing the monopoly power of its Windows operating system, said sources close to the Commission.

The draft ruling says that the failure to grant rivals access to Windows computer code, which runs on over 95 percent of the world's personal computers, is an abuse of Microsoft's dominant position, and it proposes ordering the company to reveal the code to rivals, said one person on condition of anonymity. The Commission is the European Union's (EU's) executive body.

The source said the draft ruling also finds Microsoft guilty of stifling competition in the media-playing software market. The company's own software, called Media Player, is bundled into Windows, giving it an advantage over rival products such as RealNetworks's Real Player.

However, the EC source said the draft ruling stopped short of demanding the total separation of Media Player from Windows. "The Commission doesn't appear to be pushing for the total unbundling of Media Player from Windows," the source added.

Instead, the person said the Commission will order Microsoft to offer a version of Windows without Media Player included, alongside the bundled version currently on sale.

The draft ruling proposes that Microsoft be fined for breaking EU anti-trust laws. However, the fine's amount won't be decided until the week prior to a final vote to issue the ruling by the 20 commissioners at the Commission. Their vote is expected in March or April.

Microsoft said it is still looking for a settlement. Spokesman Jim Desler said the firm's lawyers are still "engaged" in talks with the European regulators, but people close to the Commission said the chances of reaching an agreement are slimmer now that there is a draft ruling.

"Time is running very short for Microsoft," one person said, adding that the draft ruling triggers a series of final legal steps that must be completed before the final vote is taken. "There is little room to stop that process," the person said.

Microsoft has indicated that it will appeal a negative ruling to the European Court of First Instance in Luxembourg, a process that can take years to complete. Negotiations are likely to continue while the courts assess Microsoft's appeal.

One person close to the Commission said it would be to their advantage to continue talks with Microsoft after an anti-trust ruling. "They would be negotiating from a stronger position with a ruling behind them," he added.

The remedies imposed on Microsoft may not take effect until after the appeal is completed.