Microsoft Faces Lawsuit In Australia For Misleading Consumers

The Australian Competition & Consumer Commission (ACCC) has launched court proceedings against Microsoft Corporation and its Australian subsidiary, alleging that the tech giant misled roughly 2.7 million Australian subscribers of its Microsoft 365 “Personal” and “Family” plans. 

According to the regulator, Microsoft told customers they needed to accept a higher price tied to the integration of its AI assistant Copilot or cancel their subscription. However, the ACCC contends there was a third, lower-cost “Classic” plan without the AI feature, which was not clearly communicated to consumers. 

Importantly, the allegations centre on transparency and consumer choice. In essence, the watchdog asserts that Microsoft’s communications gave a false impression of limited options, thereby steering many users toward more expensive plans. Moreover, the price increases were substantial: for example, the “Personal” plan reportedly rose by 45%.  

Moreover, the ACCC notes that in terms of penalties for corporations, the maximum penalty for each breach of the Australian Consumer Law is the greater of:

• 50 million Australian dollars
• three times the total benefits reasonably attributable to the breach
• or, if the benefit cannot be determined, 30% of the company’s adjusted turnover during the breach period.

Allegations Against Microsoft In Detail

The ACCC has alleged that Microsoft misled millions of Australians over changes to its Microsoft 365 Personal and Family subscriptions. For context, on October 31, 2024, the company introduced its AI assistant, Copilot, across Microsoft 365 products and announced price increases. 

Furthermore, in a blog post published that day, Microsoft told users that subscription fees would rise upon renewal, linking the hike to new AI-powered features of Copilot. The ACCC alleges this communication gave consumers the impression that they had only two options: accept the price increase with Copilot or cancel their subscription.

Subsequently, on January 9, 2025, Microsoft emailed subscribers notifying them that their annual Personal plan would rise from AU$ 109 to AU$ 159 starting April 19, 2025. A second email on April 13, a week before renewal, reiterated that unless the user cancelled by the 17th, the new price would automatically apply for the Personal plan.

Consequently, Microsoft renewed subscriptions at the higher rate on April 19. Interestingly, the ACCC alleges that Microsoft failed to mention the hidden third alternative: a “Classic” plan that allowed subscribers to retain their existing service without Copilot and continue paying the old subscription rate.

The ACCC states that Microsoft revealed the Classic option only after users began the cancellation process, hiding it within the online cancellation flow. As a result, consumers reasonably believed their only choices were to pay more or lose access.

Notably, the Personal plan price rose by 45%, and…