"The Court of First Instance essentially upholds the Commission's decision, finding that Microsoft abused its dominant position," it said in its ruling delivered in Luxembourg.
The verdict was a blow to the software giant, which had requested the European Court of First Instance to annul the 2004 anti-trust ruling.
It was especially painful in terms of Microsoft's business strategy, which has seen the US company become one of the biggest, and most-profitable enterprises, in the world.
Immediately after the verdict, the EU's top competition regulator, said in a brief statement that it "welcomes" the outcome.
Billed as one of the biggest EU court judgements, ever, the verdict holds huge stakes for both Microsoft and for Europe's capacity to regulate corporate giants from all over the world.
Microsoft faces Monday a decisive chapter in its epic antitrust battles, when Europe's second-highest court rules whether the software giant abused its market power to crush rivals.
Eager to close its epic struggles with competition regulators, the software giant has requested the European Court of First Instance to annul a landmark 2004 antitrust ruling by the European Commission.
Microsoft has also asked the Luxembourg-based court to cancel, or, at least, reduce, the record 497 million euro fine ($690 million) that Brussels also slapped on the company in its ruling.
However, the sheer technical-and-legal complexity of the case makes it unlikely that the court's ruling will hand a clear victory to either Microsoft or the European Commission.
Billed as one of the biggest EU court judgements, ever, the verdict that the special panel of 13 judges hand down Monday at 9:30 am (0730 GMT) holds huge stakes for both Microsoft and the Commission.
If the court upholds the Commission's ruling, not only would Microsoft's business strategy suffer a painful blow, but Europe would have a stronger hand in the future to regulate corporate giants from all over the world.
But if Microsoft wins, the European Commission's credibility would be seriously dented, especially after a string of court rulings against it, in recent years.
In either case, whichever side loses is likely to lodge an appeal with the Europe's highest tribunal, the European Court of Justice, which would mean that the case could rumble on for at least another year.
While Microsoft emerged, in 2002, from a similar case in the United States, relatively unscathed, EU regulators have taken a much harder line toward the company than their US counterparts.
The EU case goes back to March 2004, when the Commission ruled, after a five-year probe, that Microsoft had abused its 95-percent share of the market for operating-systems-running personal computers (PC), thanks to its ubiquitous Windows program.
In particular, it accused Microsoft of using its grip on PC operating systems to elbow rivals out of the more competitive markets for media players that play music and videos, and operating systems running back-office servers.
The Commission ordered Microsoft to sell a version of Windows PC without a media player already bundled in, and to share technical information with rivals needed to make products that could function with Windows.
Microsoft has fought back at every chance, arguing that customers prefer Windows to include a media player, and that the Commission wants it to turn over valuable trade secrets often protected by patents and copyright to competitors.
© 2007 Agence France-Presse