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The commission, the executive body of the European Union, launched its probe in response to a complaint against .net Passport by Eric Meijer, a Dutch member of the European Parliament.
Meijer said that by failing to register with .net Passport, users are being excluded from many Web site services. He was also unhappy that unsubscribing from .net Passport is impossible.
"The commission is ... looking into this as a matter of priority, in concert with national data protection agencies, as regards the system's compatibility with EU data-protection law," European commissioner for the internal market Frits Bolkestein wrote in a letter to Meijer earlier this month.
Microsoft signed up to the EU/US safe harbour agreement in 2000. The agreement allows signatory companies from the US immunity from some of the tougher privacy laws found in Europe. However, in return the companies have to agree to abide by EU laws.
The probe into .net Passport is unconnected to the antitrust investigation being conducted by the European Commission. The European regulator is investigating the Microsoft for allegedly abusing its dominance of PC operating systems to squeeze out rivals in the market for server software. It also investigating whether by bundling Media Player into Windows, Microsoft is putting competitors at an unfair disadvantage.
The antitrust case is set to conclude later this year or in the first half of next year.