Key Points:
- Australia sues Microsoft over misleading conduct, alleging the company gave false or deceptive messages to 2.7 million Australian users about subscription renewals and pricing after adding Copilot to Microsoft 365.
- Undisclosed Cheaper Options: Microsoft allegedly failed to clearly inform users of lower-cost alternatives, leading many to pay higher fees without knowing they could opt out or downgrade.
- Federal Court Action: Legal proceedings have begun in Australia’s Federal Court, targeting both Microsoft Australia and its parent company for breaching consumer law
The Australian Competition and Consumer Commission (ACCC) has filed court proceedings against Microsoft Corporation and its Australian subsidiary, alleging the tech giant misled about 2.7 million Australian customers over Microsoft 365 subscription changes.
The case, lodged in the Federal Court, concerns Microsoft’s integration of its artificial intelligence assistant, Copilot, into Microsoft 365 personal and family plans. The ACCC alleges that since Oct. 31, 2024, Microsoft informed subscribers they had to accept higher prices to continue their subscriptions with Copilot or cancel the service altogether—without disclosing that customers could retain their existing plans without the new feature at lower prices.
ACCC chair Gina Cass-Gottlieb said the regulator viewed Microsoft’s actions as “very serious conduct” and would be seeking a substantial penalty. “We allege Microsoft deliberately hid the option to retain the old plan at the old price, in order to increase the uptake of Copilot and the associated revenue,” Cass-Gottlieb said.
Consumers allegedly misled about options
Australia sues Microsoft over claims that its communications-two emails and a blog post-misrepresented the options available to subscribers. The regulator said these messages implied consumers had to pay more for the AI-integrated plans or cancel their subscriptions, when a cheaper “classic” plan still existed.
The “classic” option could only be accessed by initiating a cancellation process, which revealed the lower-cost plan on a subsequent webpage. “This denied customers the ability to make informed decisions about their subscriptions,” Cass-Gottlieb said.
Following the integration of Copilot, Microsoft 365’s annual subscription prices increased by 45 per cent for personal plans, from $109 to $159, and by 29 per cent for family plans, from $139 to $179.
ACCC seeks penalties and consumer redress
As Australia sues Microsoft, the ACCC is seeking penalties, injunctions, consumer redress and costs. The regulator believes millions of consumers may have suffered financial harm from the automatic renewal of their subscriptions at higher prices.
More than 100 Australians submitted complaints to the ACCC after the changes took effect. Many reported confusion about the new pricing and said the option to remain on the old plan was not made clear.
Consumer Action Law Centre chief executive Stephanie Tonkin welcomed the court action, saying Microsoft’s conduct likely misled a large number of Australians. “This is exactly the sort of case our consumer regulator should be taking to protect ordinary Australians,” Tonkin said.
The Consumer Policy Research Centre also supported the move, noting that 75 per cent of Australians with subscriptions have faced difficulties when trying to cancel, and 10 per cent have given up attempting to do so.
Microsoft responds to allegations
Following the news that Australia sues Microsoft, a company spokesperson stated they are reviewing the ACCC’s claim in detail. “Consumer trust and transparency are top priorities for Microsoft,” the spokesperson said. “We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”
Cass-Gottlieb clarified that the ACCC is not challenging Microsoft’s right to raise prices or modify its services. “We do not take issue with businesses offering new services or adjusting prices,” she said. “Our concern is that millions of Australian consumers were deprived of the opportunity to make an informed choice.”
Australia sues Microsoft in one of the most significant consumer law actions against a major technology company in recent years. The Federal Court will determine whether Microsoft breached the Australian Consumer Law by providing false or misleading information and failing to adequately disclose all available subscription options.
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