The European Commission has launched an in-depth investigation of plans by Microsoft and Time Warner to acquire joint control of US ContentGuard Holdings.

The software giant and Time Warner plan to go 50-50 in ownership of ContentGuard, which makes technology to protect digital files from illegal copying, an increasingly important priority for movie and video makers, recording companies and software firms.

"The companies have been informed that the Commission has seen the need to start an in-depth investigation into this joint acquisition," competition spokeswoman Ms Amelia Torres told a daily news conference.

The European Union executive, which regulates mergers and takeovers, said a preliminary review had revealed that the deal could create or boost a dominant position by Microsoft in the market for so-called digital rights management.

During the in-depth investigation, the Commission also plans to examine concerns that the acquisition could lead to the vertical integration of Microsoft in other markets, it said. The Commission's final decision must be reached by January 6th, 2005, the EU executive said.