Microsoft Faces Legal Action in Australia Over Alleged Misleading Price Increases for AI Software
Australia's consumer watchdog has filed a lawsuit against Microsoft, claiming the tech giant misled 2.7 million customers into paying up to 45% more for software by hiding cheaper alternatives.
Microsoft is under legal scrutiny in Australia after the country’s competition regulator accused the company of misleading customers about pricing for its Microsoft 365 software suite.
The Australian Competition and Consumer Commission (ACCC) filed a lawsuit on Monday alleging that Microsoft engaged in deceptive practices when it bundled its artificial intelligence assistant, Copilot, into Microsoft 365 subscription plans starting in October 2024.
According to the ACCC, approximately 2.7 million Australian customers were led to believe they had no choice but to upgrade to more expensive subscription plans that included the AI tool. The price hike was significant—the personal plan jumped 45% to A$159 (approximately $103) per year, while the family plan rose 29% to A$179 annually.
The core of the complaint centers on what Microsoft allegedly didn’t tell customers. The regulator claims that a more affordable “classic” version of Microsoft 365—without the Copilot AI feature—remained available but was never clearly communicated to users.
According to the watchdog, customers only discovered the cheaper option existed when they tried to cancel their subscriptions. This information was buried in the cancellation process rather than being presented upfront as a genuine alternative.
The ACCC pointed out that Microsoft’s official communications, including emails sent to customers and posts on the company’s blog, failed to mention the lower-priced option. These messages only informed users that prices would increase at their next automatic renewal date.
“This design breached Australian consumer law by failing to disclose material information and creating a false impression of available choices,” the regulator stated.
In response to the allegations, a Microsoft spokesperson said the company is carefully reviewing the ACCC’s claims. However, no detailed statement has been issued yet.
The ACCC is seeking several remedies through the court system, including financial penalties, compensation for affected consumers, legal injunctions to prevent future violations, and coverage of legal costs. The lawsuit targets both Microsoft Australia Pty Ltd and its U.S. parent company, Microsoft Corp.
Under Australian consumer law, companies found guilty of such breaches can face substantial penalties. The maximum fine is determined by whichever is greatest among three options: A$50 million, three times the benefit the company gained from the violation, or 30% of the company’s revenue during the period of the breach if benefits cannot be calculated.
The regulator emphasized that any actual penalties would be decided by the court based on its findings. “The ACCC will not comment on what penalties the Court may impose,” officials said.
This case highlights growing global concerns about how technology companies communicate pricing changes and product options to consumers, particularly as AI features become increasingly integrated into everyday software.
