Microsoft misled users into pricier AI-linked 365 plans, says Australian watchdog; files lawsuit

Australia’s competition watchdog on Monday launched legal action against Microsoft, accusing the tech giant of misleading consumers into purchasing higher-priced Microsoft 365 plans after the inclusion of its artificial intelligence assistant, Copilot.

Regulator alleges misleading price push

The Australian Competition and Consumer Commission (ACCC) said that, beginning in October 2024, Microsoft misled roughly 2.7 million Australian customers by implying they needed to upgrade to new, more expensive personal and family subscription plans that featured Copilot.

According to the regulator, the annual price of the Microsoft 365 Personal plan rose by 45% to A$159 ($103.32), while the Family plan increased by 29% to A$179 ($117) following the AI assistant’s integration.

Cheaper option hidden behind cancellation

The ACCC alleged that Microsoft failed to make clear that a lower-cost “classic” version of Microsoft 365, without Copilot, remained available. Consumers were reportedly only informed of this alternative after initiating the cancellation process, a design choice the regulator said breached Australian consumer law.

“The omission of such material information and the presentation of limited choices created a false impression about available options,” the ACCC said.

Legal action and potential penalties

The commission is seeking financial penalties, consumer redress, injunctions, and legal costs from Microsoft Australia Pty Ltd and its US parent company, Microsoft Corp.

Under Australian law, companies found guilty of misleading conduct can face maximum fines of the greater of A$50 million, three times the benefit obtained, or 30% of adjusted turnover during the breach period if the benefit cannot be calculated.

“Any penalty that might apply to this conduct is a matter for the Court to determine and would depend on the Court’s findings,” the ACCC said, adding that it would not speculate on the outcome.

ABC News reported in February that a customer had lodged a complaint with Australia’s competition regulator regarding Microsoft’s recent pricing changes. Earlier in the year, after Microsoft raised the cost of its Microsoft 365 subscriptions in Australia, many users took to online forums to voice frustration over the increases.

According to the publication, the Australian Competition and Consumer Commission (ACCC) said it will also pursue compensation for personal and family plan subscribers affected by the alleged misconduct.

The introduction of the Copilot AI assistant saw the annual price of the Microsoft 365 Personal plan rise by 45 per cent — from A$109 to A$159 — while the Family plan went up 29 per cent, from A$139 to A$179.

According to the ACCC, Microsoft informed customers about the Copilot integration and price changes through two email notices and a blog post, issued to auto-renewing subscribers as of 31 October 2024. These communications, the regulator said, are central to its case.

As of Monday, Microsoft had not issued a public statement regarding the proceedings. The case marks one of the first major regulatory challenges to the integration of AI services into mainstream consumer software in Australia.