The ACCC has launched legal action against Microsoft for allegedly misleading 2.7 million Australians about Microsoft 365 subscription options and price hikes linked to its AI assistant, Copilot.
Microsoft Accused of Misleading 2.7 Million Australians Over AI-Linked Microsoft 365 Price Increases
The Australian Competition and Consumer Commission (ACCC) has filed a lawsuit in the Federal Court against Microsoft Australia and its U.S. parent, Microsoft Corporation, accusing the tech giant of misleading around 2.7 million customers over subscription renewals and price increases following the integration of Copilot AI into its Microsoft 365 plans.
According to the ACCC, since October 31, 2024, Microsoft informed subscribers of its Microsoft 365 Personal and Family plans that they must either accept the new AI-integrated subscriptions at higher prices or cancel their plans.
However, the regulator alleges that this was false or misleading, as Microsoft failed to disclose a third option — the Microsoft 365 “Classic” plans — which allowed users to continue their existing subscription without Copilot at the original lower price.
Hidden Option and Lack of Transparency
The ACCC claims Microsoft intentionally concealed the Classic plans, revealing them only when users began the cancellation process. Customers would have to navigate through the “Cancel subscription” section to discover an offer to switch to the Classic version.
“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,” said ACCC Chair Gina Cass-Gottlieb.
“Given the essential role of Microsoft Office apps in daily life, many consumers would have felt compelled to keep their subscriptions — unaware of a cheaper, Copilot-free option.”
The ACCC says this omission denied consumers the right to make informed decisions, and that many users would have chosen the Classic plan had they known it existed.
Sharp Price Hikes After Copilot Integration
Following the Copilot rollout, Microsoft significantly raised its subscription fees:
Microsoft 365 Personal: from AUD 109 to AUD 159 per year (+45%)
Microsoft 365 Family: from AUD 139 to AUD 179 per year (+29%)
These increases were communicated via two emails and a blog post, which the ACCC alleges were false or misleading, as they implied users had no option other than paying more or cancelling.
“All businesses must provide accurate information about services and pricing,” Cass-Gottlieb said. “Failure to do so risks breaching Australian Consumer Law.”
Consumer Complaints and Online Evidence
The ACCC’s investigation was triggered by consumer reports and online discussions, including Reddit posts, revealing that users discovered the Classic plan only through the cancellation process. The regulator is now seeking penalties, injunctions, declarations, consumer redress, and legal costs.
The ACCC believes that millions of Australians may have suffered financial harm by automatically renewing their subscriptions at higher rates without being properly informed of their options.
Example: How Consumers Were Misled
A typical user’s experience shows the alleged pattern:
April 2024: Purchased Microsoft 365 Personal for AUD 109.
October 2024: Microsoft announced a future price increase tied to Copilot integration.
January 2025: Received email about price rising to AUD 159.
April 2025: Subscription auto-renewed at the higher price — without mention of the Classic plan.
What It Means for Microsoft
This case poses a major reputational and regulatory risk for Microsoft, whose push to integrate AI across its products is facing increased scrutiny from global regulators. If the court rules in favor of the ACCC, Microsoft could face hefty penalties and consumer compensation orders.
The ACCC has urged affected users to review their current subscriptions and explore available options — though it warns that Microsoft controls all pricing and plan availability and may change them at any time.
Rajani Baburajan
