The European Union's executive body, the Commission, is to open an investigation into whether Microsoft has kept the competition commitments it made in 2009, warning that penalties for non-compliance could be severe.
EU Competition Commissioner Joaquin Almunia said the indications are that Microsoft has failed to provide customers with a screen from which they could choose different internet browsers instead of seeing only Microsoft's product, Internet Explorer.
Mr Almunia said it appears that the choice screen, promised by Microsoft as the result of a previous anti-trust case, has not been provided since February 2011, meaning 28 million customers may not have seen it.
He said that Microsoft does not appear to be contesting the facts. Mr Almunia added: "If infringements are confirmed, there will be sanctions."
In a statement, Microsoft conceded it had "fallen short" of its responsibility, while acknowledging that it was required to provide the browser choice screen, or BCS.
"Due to a technical error, we missed delivering the BCS software to PCs that came with the service pack 1 update to Windows 7," the statement said.
The company said that PCs running the original version of Windows 7, as well as Windows XP and Windows Vista, did have the screen.
"While we have taken immediate steps to remedy this problem, we deeply regret that this error occurred and we apologise for it," Microsoft said.
Microsoft submitted a report to the Commission in December saying the browser choice screen was being provided as required. In its statement, the company said it believed at the time that was the case.
Mr Almunia said this would be the first time that this type of legally binding agreement has not been complied with.