Australia's competition regulator has filed a lawsuit against Microsoft for allegedly misleading about 2.7 million Australian consumers about subscription options and pricing for Microsoft 365 plans.
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The Australian Competition and Consumer Commission (ACCC) alleges that Microsoft intentionally concealed the availability of cheaper alternatives when integrating its Copilot artificial intelligence assistant into its subscription offerings.
The substance of the ACCC complaint focuses on what regulators describe as misleading communication practices following Microsoft's decision to bundle Copilot with Microsoft 365 subscriptions from October 31, 2024.
According to the ACCC, Microsoft informed subscribers that they would either have to accept the integration of Copilot at significantly higher prices or cancel their subscriptions altogether. What Microsoft allegedly failed to mention was the existence of the Microsoft 365 Personal and Family Classic, which allowed customers to keep their existing features without Copilot at the original lower price. The Classic plans remained virtually invisible to subscribers, revealing their existence only deep into the subscription cancellation process, accessible only after users navigated to the subscriptions section of their Microsoft account and selected the cancellation option.
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This hidden placement meant that most consumers never discovered the alternative existed. The price increases that accompanied the inclusion of Copilot were significant. Microsoft’s communication strategy was based on three key pieces: two emails sent to auto-renewing subscribers and a blog post. These messages conveyed that consumers were faced with a binary choice between accepting the expensive plans with Copilot built-in or canceling altogether. The ACCC alleges that this information was intentionally false and misleading by omission.
“After a thorough investigation, we will allege in court that Microsoft intentionally failed to mention the Classic plans in its communications and concealed their existence until subscribers began the cancellation process in order to increase the number of consumers on the more expensive plans with Copilot built-in,” according to statements from regulators.
The regulator claims that many consumers would have opted for the Classic plan had they known about its existence, resulting in financial harm through unwanted price increases on renewal subscriptions. The ACCC is seeking compensation for affected subscribers along with penalties, injunctions and declarations against Microsoft Pty Ltd and Microsoft Corporation.
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For companies that breach the Australian Consumer Law, penalties can be up to $50 million, three times the benefits obtained or 30 per cent of the adjusted turnover during the period of the breach. The court will ultimately determine the applicable penalties based on its findings. The case relates solely to Microsoft 365 Personal and Family plans aimed at consumers, excluding business and enterprise subscriptions.
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