The consumer watchdog is suing Microsoft for allegedly misleading about 2.7 million Australians over its Microsoft 365 subscriptions.
The Australian Competition and Consumer Commission (ACCC) has launched proceedings in the Federal Court against Microsoft Australia and its parent company Microsoft Corporation, for allegedly misleading customers about subscription options and price increases after it integrated its AI assistant, Copilot, into Microsoft 365 plans.
The regulator has alleged that since late last year, the tech giant told subscribers of certain plans that they must pay a higher price to maintain their subscriptions, which would now include Copilot, or they would need to cancel.
The ACCC said Microsoft misled customers by not disclosing that subscribers could retain their current plans, without Copilot, at their existing lower prices.
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A Microsoft spokesperson told ABC News the company was reviewing the ACCC’s claim in detail.
“Consumer trust and transparency are top priorities for Microsoft,” they said.
“We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”
ABC News revealed in February that a customer had reported the tech giant to the regulator over the pricing changes.
After Microsoft increased its Australian Microsoft 365 subscription prices at the start of the year, users flocked to online forums to criticise the changes.
Microsoft allegedly failed to disclose ‘classic’ subscription option
The ACCC has alleged that since October 31, 2024, Microsoft told subscribers of Microsoft 365 personal and family plans with auto-renewal enabled that to maintain their subscription, they must accept the integration of Copilot and pay higher prices for their plan, or, alternatively, cancel their subscription.
The regulator said Microsoft’s communication with subscribers did not refer to the existence of the cheaper “classic” plans, and the only way subscribers could access them was to begin the process of cancelling their subscription.
This involved navigating to the subscriptions section of their Microsoft account and selecting “cancel subscription”.
It was only on the following page that subscribers were given the option to instead move to the classic plan.
A screenshot of the cancellation page revealing the Classic plan. (Supplied: ACCC)
“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.
“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, cancelling the subscription is a decision many would not make lightly.
“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.
“We believe many Microsoft 365 customers would have opted for the classic plan had they been aware of all the available options.”
Gina Cass-Gottlieb says the regulator believes Microsoft “deliberately omitted” details of its classic plans. (ABC News: John Gunn)
Australians had to opt out rather than opt in
The ACCC will be seeking orders including penalties, injunctions, declarations, consumer redress and costs.
The consumer watchdog has argued the millions of Australian consumers who were allegedly misled by Microsoft may have suffered economic harm through the automatic renewal of their subscription with Copilot integration at a higher price.
The ACCC will also be seeking consumer redress, in this case for Microsoft 365 personal and family subscribers affected by the alleged conduct.
Following the integration of Copilot, the annual subscription price of the Microsoft 365 personal plan increased by 45 per cent from $109 to $159.
The annual subscription price for the Microsoft 365 family plan increased by 29 per cent from $139 to $179.
Microsoft sent two emails and published a blog post to inform auto-renewing subscribers (as of October 31, 2024) about the Copilot integration and the impending price increase that would apply at their next renewal.
These three pieces of communication are central to the ACCC’s case.
“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,” Ms 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 said to conduct its investigation, it drew on a significant number of consumer reports, as well as commentary in online forums such as Reddit.
It said information provided by consumers to the ACCC’s Infocentre was critical to alerting it to the alleged conduct, particularly in identifying the availability of the classic plan through subscribers’ cancellation flows.
Existing Microsoft 365 personal and family subscribers who have not had their subscription renewed since July 8, 2025 and would like to revert to their previous plan may be able to select the cancel option and follow the steps in the cancellation process until the classic plan is offered.
However, the ACCC noted the subscription options and prices offered were entirely in Microsoft’s control and could be subject to change at any time.