The Australian Competition and Consumer Commission has taken Microsoft to the Federal Court for allegedly misleading around 2.7 million customers over subscription options for its Microsoft 365 service. The case, filed in New South Wales, accuses Microsoft Australia and its US parent company of breaching Australian Consumer Law through misleading or deceptive conduct.
The ACCC says the problem began when Microsoft integrated its AI assistant, Copilot, into Microsoft 365 Personal and Family plans on 31 October 2024. Customers were told that keeping their subscription meant accepting Copilot and paying higher prices, or cancelling their plan altogether. The ACCC says this was false because there was a third option which is a cheaper “Classic” plan that excluded Copilot but offered the same features at the old price.
The ACCC’s chair, Gina Cass-Gottlieb, said Microsoft “deliberately omitted reference to the Classic plans in its communications” and that this prevented customers from making informed decisions. The regulator says it believes many people would have chosen to stay on their previous plan if they had known this option existed.
What Did Microsoft Tell Customers?
Between October 2024 and January 2025, Microsoft sent two emails and published a blog post to inform subscribers about price increases tied to Copilot. In these communications, the company told customers that to continue using Microsoft 365, they needed to accept the integration of AI and pay higher prices.
For those on the Microsoft 365 Personal plan, the annual price increased by 45%, rising from $109 to $159. For Family plans, the cost went up 29%, from $139 to $179. The ACCC says these messages misled subscribers into thinking they had only two options: accept the higher price or cancel their subscription.
What Microsoft did not mention was the existence of the Classic plan. The only way customers could find it was to start cancelling their subscription. After clicking “Cancel subscription” and continuing through the process, a screen appeared showing an alternative option to keep their current plan at the old price, without Copilot.
The ACCC claims this design was deliberate and that Microsoft wanted to increase the number of users on its more expensive, AI-integrated plans and reduce the number opting out of Copilot.
What Does The ACCC Say Microsoft Did Wrong?
The ACCC argues that Microsoft’s communications breached sections 18 and 29 of the Australian Consumer Law. These parts of the law prohibit misleading or deceptive conduct and false or misleading representations about services and pricing.
In its legal filing, the ACCC says Microsoft misrepresented three things: that users had to accept Copilot to keep their subscription, that they had to pay higher prices, and that their only choices were to upgrade or cancel. It says these representations were both express and implied, made through the wording of the emails and the failure to mention the Classic plan.
The regulator also accuses Microsoft of concealing the Classic plan to reduce the number of people who might choose it. It claims this conduct led customers to renew at a higher cost, unaware they could have stayed on their old plan. Those affected may have lost money equal to the difference between the new price and the old one.
What Will Come From This?
The ACCC is asking the Federal Court for penalties, injunctions, declarations, consumer compensation, and costs. It also wants the court to rule that Microsoft broke the law by misleading customers about their subscription choices.
Under Australian Consumer Law, the maximum penalty for corporations is the greater of $50 million, three times the benefit gained, or 30% of turnover during the breach period. The court will decide the final penalty if Microsoft is found to have broken the law.
Microsoft Australia sells Microsoft 365 subscriptions locally, while its parent company in the United States prepared and issued the misleading emails and blog posts. The ACCC’s case covers only home-use plans (Personal and Family) and not business or enterprise subscriptions.
The regulator says consumer reports and online discussions, including on Reddit, helped uncover the issue. It says this feedback showed many users were unaware of the Classic plan until they tried to cancel.
The ACCC’s action forms part of its work on fair trading in the digital economy. Its argument is that Microsoft’s conduct denied customers a fair choice and may have caused financial harm to millions of Australians who relied on Microsoft 365 for everyday use.
