Australia’s competition regulator has taken legal action against Microsoft, claiming the company misled millions of customers into paying higher prices for its Microsoft 365 subscriptions after adding its artificial intelligence tool, Copilot.
The Australian Competition and Consumer Commission (ACCC) filed the lawsuit, stating that since October 2024, Microsoft allegedly deceived about 2.7 million customers by suggesting they needed to move to new, higher-priced plans that included the AI feature.
Copilot, which was introduced to help users write, organise, and perform digital tasks more efficiently, was integrated into Microsoft 365’s personal and family plans. However, this addition led to a steep increase in subscription prices. The annual cost of the personal plan rose by 45 percent, reaching A$159 (around $103), while the family plan jumped by 29 percent to A$179.
The ACCC said that Microsoft did not make it clear that users could remain on their cheaper “classic” plans that did not include Copilot. The option to continue using the lower-priced plans was hidden from customers and only became visible if they started to cancel their subscriptions.
The regulator calls it misleading and manipulative
According to the ACCC, Microsoft’s communication about the price changes was unclear and misleading. The company’s emails and blog posts told customers that subscription fees would rise at the next renewal, but failed to mention that cheaper plans were still available.
The ACCC stated that Microsoft’s design and communication choices gave users the sense that continuing with the new, more expensive plans was the only option.
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The watchdog said that the cheaper “classic” plan was only shown after customers began the cancellation process, which made the process unfair. The ACCC argued that this design tricked people into paying more, using their trust in the brand against them.
Microsoft said in response that it is reviewing the ACCC’s claims carefully and would cooperate with authorities. However, the company did not share any additional comments about the allegations.
ACCC seeks strong penalties and consumer redress
The ACCC has asked the court to impose penalties on Microsoft and its Australian subsidiary. It is seeking financial penalties, refunds for affected customers, legal costs, and injunctions to prevent similar actions in the future.
Under Australian consumer law, companies that breach these regulations can face significant fines. The maximum penalty can be the greater of A$50 million, three times the value of the benefit gained from the breach, or 30 percent of the company’s adjusted turnover during the period of the violation if the benefit cannot be determined.
This means that Microsoft could face millions of dollars in penalties depending on how the court assesses the case. The regulator added that it would not speculate on what penalties might be applied, as that decision rests solely with the court.
The ACCC said its main goal is to ensure that companies operating in Australia are transparent and honest with consumers, especially when dealing with subscription models and digital tools that millions rely on.
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Tools like Microsoft’s Copilot have been promoted as productivity boosters that can help users write, analyse data, and organize work more efficiently. However, the ACCC’s complaint shows that regulators are also focusing on whether consumers are being misled about their options or pressured into paying more.
For now, Microsoft faces serious legal scrutiny in Australia. The outcome of this case will depend on how the court interprets the evidence and determines whether Microsoft’s actions violated consumer law by misleading millions of users into paying more for their Microsoft 365 subscriptions.