Microsoft faces a fresh regulatory battle, this time in Europe.

The European Commission (EC) has been ordered to investigate claims from a French company that the US software giant has abused its dominant position.

A European court found on Thursday that the EC had been wrong to dismiss the complaint from French software wholesaler Micro Leader Business (MLB).

Three years ago, MLB alleged that Microsoft had violated European antitrust rules.

MLB alleged that the US software giant tried to stop it from buying cheaper software in Canada for resale in France. Microsoft did this by fixing prices with its distributors and by asking them not to sell imported Canadian software, MLB claimed.

Last year, the EC found that Microsoft was entitled to prevent these imports under legal principles on trademarks and there was insufficient evidence of price fixing. It then decided not to examine Micro Leader's second complaint: that Microsoft was abusing its dominant position.

While the court agreed that MLB had presented insufficient evidence of price fixing, it said the European Commission should have "verified" if the complaint was grounded and if Microsoft were abusing its dominant position.

Microsoft battle

Microsoft says the issue at stake in Europe is different to the ongoing regulatory battle in the US, where it is charged with abusing its monopoly power.

"We're concerned that the sale of these grey imports provide cover for the sale of counterfeit products," John Frank, Microsoft's director of law and corporate affairs for Europe, said.

He added that "we look forward to talking to the Commission on these issues, and will be proactive in going to the Commission about software counterfeiting."

In November, a US court held that Microsoft was a monopoly that stifled competition and hurt consumers.

The US Justice Department and 19 US states had charged Microsoft with abusing its monopoly power in order to sell more copies of its own internet browser and damage the business prospects of rival browser Netscape Navigator.

Microsoft argued that, although its Windows operating system runs on 90% of the world's personal computers, it did not act as a monopoly. The company said it benefited its customers by giving them additional features at no extra cost.

The court has since appointed a mediator, in the hope that the two sides can reach an out-of-court settlement.