Key takeaways Australia's competition regulator has sued Microsoft for allegedly misleading 2.7 million customers about subscription pricing options after integrating Copilot AI into Microsoft 365 pla...
Australia's competition watchdog has launched legal action against Microsoft, accusing the technology giant of misleading approximately 2.7 million customers over subscription pricing changes related to its Copilot AI assistant.
The Australian Competition and Consumer Commission filed proceedings in the Federal Court on Monday against Microsoft Australia and its parent company, Microsoft Corp, alleging the companies violated Australian Consumer Law by failing to adequately disclose cheaper subscription options to customers.
According to the ACCC, Microsoft informed subscribers of its Microsoft 365 Personal and Family plans starting October 31, 2024, that they had only two choices: accept higher prices for plans that included the Copilot AI assistant, or cancel their subscriptions entirely.
However, the regulator alleges Microsoft failed to disclose a third option—the Microsoft 365 Classic plan—which allowed customers to retain all their existing features without Copilot at the original, lower price.
The Classic plan option only became visible to customers after they initiated the cancellation process through their Microsoft account settings, the ACCC claims.
"Following a detailed investigation, we will allege in Court that Microsoft deliberately omitted reference to the Classic plans in its communications and concealed their existence until after subscribers initiated the cancellation process to increase the number of consumers on more expensive Copilot-integrated plans," ACCC Chair Gina Cass-Gottlieb said in a statement.
Cass-Gottlieb emphasized the essential nature of Microsoft's products in justifying the legal action.
"The Microsoft Office apps included in 365 subscriptions are essential in many people's lives, and given there are limited substitutes to the bundled package, canceling the subscription is a decision many would not make lightly," she said. "We're concerned that Microsoft's communications denied its customers the opportunity to make informed decisions about their subscription options, which included the possibility of retaining all the features of their existing plan without Copilot and at the lower price."
The integration of Copilot into Microsoft 365 subscriptions came with substantial price hikes for Australian consumers.
The annual subscription price for Microsoft 365 Personal increased by 45 percent, rising from A$109 to A$159. The Family plan saw a 29 percent increase, jumping from A$139 to A$179.
The ACCC's investigation focused on three key pieces of communication from Microsoft: two emails sent to existing subscribers and one blog post.
"We allege that Microsoft's two emails to existing subscribers and the blog post were false or misleading as they conveyed that consumers had to accept the more expensive Copilot-integrated plans, and that the only other option was to cancel," Cass-Gottlieb said. "All businesses need to provide accurate information about their services and prices. Failure to do so risks breaching the Australian Consumer Law."
The ACCC's investigation was prompted by a significant number of consumer complaints and commentary on online forums, including Reddit, where subscribers expressed frustration over the pricing changes and the difficulty in finding alternatives.
The ACCC is seeking court orders, including penalties, injunctions, declarations, consumer redress, and costs. Under Australian Consumer Law, Microsoft could face penalties of A$50 million or more for each breach.
Microsoft responded to the lawsuit with a brief statement. "Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC's claim in detail," a Microsoft spokesperson said. "We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards."
The case represents one of the first major regulatory challenges targeting how technology companies bundle and market generative AI services within their existing software ecosystems.
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