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When Microsoft's chief executive Steve Ballmer flew to Brussels last week, he was carrying an eleventh-hour offer to settle the European Union's antitrust complaints against the company. But the E.U.'s antitrust czar, Mario Monti, wasn't swayed. Monti will proceed with his plans to punish the software giant for allegedly abusing its monopoly and harming competitors and consumers. Details will be announced this week, but the E.U.'s action promises to be the sharpest regulatory rebuke Microsoft has received, far harsher than the settlement the company made with the U.S. Justice Department and several states two years ago.

The Europeans will order Microsoft to make its Windows PC operating system available to manufacturers and consumers in two versions: one with Media Player — Microsoft's proprietary video and music software — built in, as it is now, and one without it. The company is also likely to be fined, perhaps several billion dollars. Most significantly, Monti is expected to try to use the ruling to prevent Microsoft from pushing future products on consumers by "bundling" them with its operating system. Microsoft will survive the fine, but the crackdown will hurt, which is why the restrictions on bundling scuppered last-minute negotiations. "We were unable to agree on principles for new issues that could arise in the future," Ballmer said in a statement. Microsoft is almost certain to appeal. Still, its many foes seem happy. "Monti played his hand superbly," says Ed Black, president of the Computer and Communications Industry Association.

• Peter Gumbel