ACCC Sues Microsoft Australia Over Copilot Plan Omission and Price Hike

Microsoft is facing a high-stakes legal showdown in Australia after the nation’s competition regulator filed proceedings alleging the company misled millions of subscribers about the way it rolled Copilot — its AI assistant — into Microsoft 365 consumer plans, and about the options available to avoid an automatic price hike.

Background​

The Australian Competition and Consumer Commission (ACCC) commenced Federal Court proceedings against Microsoft Australia Pty Ltd and its U.S. parent, Microsoft Corporation, after concluding that communications sent to auto-renewing Microsoft 365 Personal and Family subscribers omitted a material subscription choice and therefore misled consumers. The ACCC’s case centers on a sequence of communications — two emails and a public blog post — sent around the time Copilot was integrated into those consumer plans. The regulator says those communications presented subscribers only two choices: accept the new Copilot-integrated plans at higher prices, or cancel the subscription entirely.
The ACCC alleges a third option existed but was effectively concealed: a “Classic” tier of Microsoft 365 Personal and Family that retained existing app and cloud features without Copilot at the pre-increase price. The regulator says that option was only displayed later in the online cancellation flow, meaning many customers were never informed of the lower-cost alternative when deciding whether to accept the renewal price change.
Key factual claims made by the regulator include:

• Approximately 2.7 million Australian subscribers with auto-renewal enabled were affected.
• Copilot was integrated into Microsoft 365 Personal and Family in Australia on 31 October 2024.
• The annual price for Microsoft 365 Personal increased from AU$109 to AU$159 (a 45% increase).
• The annual price for Microsoft 365 Family increased from AU$139 to AU$179 (a 29% increase).
• The ACCC is seeking penalties, injunctions, consumer redress, and legal costs; statutory maximum penalties for each breach can be the greater of AU$50 million, three times any benefit obtained from the conduct, or 30% of adjusted turnover for the breach period.

These figures and dates are set out in the ACCC’s initiating materials filed in court and form the backbone of its allegations.

---

What the ACCC is alleging — details and legal theory​

The ACCC’s central claim​

The regulator’s claim is straightforward from a legal perspective: Microsoft conveyed an incomplete and misleading choice to consumers. Under Australian Consumer Law, businesses are prohibited from making false or misleading representations and must not omit material information when that omission is likely to mislead consumers.
The ACCC contends Microsoft’s emails and the blog post conveyed that customers faced two options — accept the Copilot-integrated plan and the higher price, or cancel — while omitting the materially different option of remaining on an existing-feature plan at the original price by switching to a “Classic” plan. The regulator argues that omission denied consumers an informed choice and therefore amounted to misleading conduct.

Evidence the ACCC highlights​

The ACCC’s case relies on:

• The text of two consumer emails and a public blog post announcing Copilot’s consumer integration and the forthcoming price increase.
• A timeline showing when the communications were issued relative to subscribers’ next renewal dates.
• Screenshots or procedural descriptions of the cancellation flow that, according to the ACCC, only revealed the Classic plan option after users initiated cancellation.
• Pricing comparisons showing the percentage increases applied to Personal and Family plans.

Legal remedies sought​

The remedies the ACCC is pursuing include:

• Financial penalties for breaches of the Australian Consumer Law.
• Declarations and injunctions preventing repeated or continuing misleading conduct.
• Consumer redress, which could include refunds or compensation for affected subscribers.
• Cost orders requiring Microsoft to pay legal costs.

The ACCC emphasises the seriousness of the alleged conduct, arguing the bundled Office apps are essential to many households and that many consumers would not lightly opt to cancel a subscription without being given full information.

---

Microsoft’s public position and the product context​

Microsoft’s product strategy and public communications are central to understanding both sides of the dispute.

How Microsoft described the change​

Microsoft rolled Copilot into consumer Microsoft 365 plans as part of a broader push to make AI features available to mainstream subscribers. Microsoft’s public blog posts announcing Copilot’s inclusion stated the company was increasing prices to reflect additional value and confirmed that existing subscribers would not see the price increase until the next renewal. Microsoft also stated it would provide options for customers who did not want Copilot, including the ability to switch to plans “without Copilot” and to “Classic” plans for a limited time. Microsoft likewise said it would include in-app settings to disable Copilot features where customers preferred not to use AI assistance.

Microsoft’s immediate response to the lawsuit​

In media responses, Microsoft said it was reviewing the ACCC’s claim and emphasised its commitment to consumer trust and compliance with the law. Microsoft has previously positioned Copilot as a major feature addition intended to “supercharge” Office apps like Word, Excel, PowerPoint, and Outlook for consumers, and has highlighted privacy protections and settings to control AI features.

The operational contradiction at the heart of the dispute​

The dispute is not about whether Classic plans existed — Microsoft’s communications indicate they did — but rather when and how consumers were told about those alternatives and whether those communications were adequate under consumer-protection laws. That timing and the presentation of options in the cancellation flow are the precise issues the ACCC has framed as deceptive omissions.

---

Why this matters: consumer impact and market leverage​

Consumer harm is not merely hypothetical​

The ACCC frames the harm as tangible. For many households, Microsoft 365 apps and OneDrive storage are essential tools for work, education, and personal use. Faced with an unexpected annual price jump of 29–45%, a customer without a clear option to retain their prior plan may feel coerced into paying more or forced to go through the disruption of cancelling and shopping for alternatives.

• A sudden higher renewal may hit household budgets, particularly where automatic renewals are common.
• Cancellation is not frictionless for many users; taxonomies, shared family access, and retained files can complicate decisions.
• If Classic options were concealed, the regulator argues many customers paid more than they otherwise would have.

Market power and limited substitutes​

The ACCC points to limited substitutes for the Microsoft 365 bundle as a factor increasing consumer vulnerability. The integrated nature of Office apps, Outlook, Teams, and OneDrive — all under familiar Microsoft branding and cross-device availability — gives Microsoft significant stickiness. When a large provider changes the terms of an essential bundled product, regulators scrutinise whether consumers could realistically switch.

---

Cross-border and sectoral implications​

A potential blueprint for other regulators​

This case is one to watch globally. Regulators in multiple jurisdictions are already focused on AI-related consumer protections, product transparency, and pricing fairness. The Australian action could encourage:

• Similar enforcement in other jurisdictions where Microsoft offers Copilot-integrated consumer plans.
• Scrutiny of how other major platforms communicate AI-related upgrades that alter pricing or privacy profiles.
• Closer regulatory attention to subscription flows and how companies present choices to customers, particularly where auto-renewal is common.

Broader implications for subscription-based AI features​

The case highlights a tension that will recur across industries: how to monetize AI enhancements without running afoul of consumer law. Companies face two competing pressures:

• Monetise AI features that deliver genuine additional value.
• Preserve consumer trust by making opt-out choices and pricing transparent.

Regulators will expect visibility, clarity, and easy access to alternatives — not buried options revealed only after a cancellation sequence starts.

---

Legal analysis: strengths, weaknesses, and likely defenses​

Strengths of the ACCC’s case​

• Detailed documentary record: The ACCC’s filing cites specific communications and a timeline tied to subscriber renewal dates, which strengthens its factual foundation.
• Clear legal standard: Australian Consumer Law has well-established prohibitions against misleading conduct and omissions; showing that a material fact was omitted can be decisive.
• Magnitude of alleged harm: The number of affected subscribers and the material size of price increases (29–45%) make the case salient and likely to attract judicial scrutiny.

Weaknesses and potential defenses for Microsoft​

• Microsoft disclosed Classic plans publicly: Microsoft’s own blog and FAQs stated options existed, which it can argue constitutes disclosure.
• Consumer choice and in-app settings: Microsoft can point to settings and in-app controls that allow users to disable Copilot, arguing that consumers were not deprived of meaningful choice.
• Complex consumer behavior: Microsoft might argue that informed consumers would have noticed and exercised the Classic-plan option or switched plans prior to renewal.
• Temporal and jurisdictional nuances: Microsoft could contest the ACCC’s interpretation of timing or claim practical limitations in rolling out options simultaneously across markets.

Key legal battlegrounds to watch​

• Whether the omission of the Classic option was material to consumers at the time of the communications.
• Whether Microsoft’s public statements and blog post were sufficient disclosure as a matter of law.
• Whether the cancellation flow evidence shows deliberate concealment or a design that, while perhaps clumsy, was not intended to mislead.

---

Practical steps for affected consumers and subscribers​

For consumers worried about renewals, billing, or potential redress, practical steps include:

• Check your renewal date and billing records — confirm when your Microsoft 365 plan next renews and how much was charged.
• Review plan options in your account — look specifically for “Classic,” “Basic,” or non-Copilot plan choices before a renewal date.
• Turn off auto-renewal if unsure — disabling auto-renewal gives time to evaluate options before charges occur.
• Use the cancellation flow to inspect alternative offers — if the Classic option appears during cancellation, document screenshots and timestamps.
• Contact Microsoft Support and request formal confirmation in writing — keep correspondence for potential redress.
• Seek redress through your bank if unauthorised charges occur — card providers may offer dispute mechanisms if billing practices are suspect.
• Monitor official announcements from authorities — follow regulator guidance on eligibility for refunds or compensation.

For family or shared subscriptions, coordinate with other account holders before switching plans or cancelling to avoid service interruption.

---

What this could mean for Microsoft strategically​

Short-term risks​

• Financial exposure: Penalties could be substantial if the court finds multiple breaches; the statutory maxima are meaningful even if courts often impose lower figures.
• Operational disruption: The need to amend communications and subscription flows in Australia — and possibly elsewhere — could require product and marketing changes.
• Reputational harm: Publicity around the case may dampen consumer trust and slow adoption among hesitant users.

Long-term strategic considerations​

• Product packaging and pricing: Microsoft may revisit how AI features are bundled, possibly offering clearer legacy alternatives or tiered migration paths.
• Global compliance posture: The case will likely prompt Microsoft to audit similar communications and renewal flows in other markets to reduce enforcement risk.
• Regulatory engagement: Microsoft may increase engagement with consumer agencies to align rollout plans for major product changes to regulatory expectations.

---

Wider lessons for the industry​

• Transparency must be primary — when AI features materially change the value proposition or price of a subscription, companies must make alternatives obvious and easily actionable.
• Auto-renewal is a regulatory flashpoint — regulators scrutinise whether auto-renewal and related notices meaningfully inform consumers.
• Design choices carry legal risk — where an alternative is discoverable only through a cancellation path, regulators may view that as a design intended to obscure rather than inform.
• Documentation is critical — firms rolling out major changes should retain clear documentation of what was communicated, when, and how consumers could opt out.

---

Potential outcomes and timelines​

The Federal Court will now consider the ACCC’s initiating application. Possible procedural and substantive outcomes include:

• Early settlement or undertaking: Microsoft may agree to provide redress and change practices to avoid prolonged litigation.
• Court trial on merits: If the ACCC pushes ahead, the court will evaluate whether the conduct amounted to misleading and deceptive behavior; this could take many months.
• Remedies and penalties: If the court finds contraventions, it can impose fines, order consumer redress, and grant injunctions to prevent recurrence.

Timeframes for such disputes can vary; initial hearings and interlocutory applications may occur in the weeks and months after filing, with substantive trials potentially a year or more out depending on the court calendar.

---

Caveats and unverifiable elements​

• The assertion that Microsoft deliberately concealed the Classic plans is the ACCC’s legal allegation. Deliberate intent is a high bar to prove and is a contested factual and legal issue the court will determine.
• Public reporting on Microsoft’s internal decision-making or KPI-driven motives is speculative unless supported by documentary evidence disclosed in court.
• Any figures about the number of affected consumers, the exact number of breaches, or the aggregate monetary benefit Microsoft obtained will be subject to proof in court and may be adjusted as litigation proceeds.

Where the ACCC asserts consumer harm, those are allegations at this pleading stage; the court process will test evidentiary foundations.

---

Final assessment: accountability, consumer trust, and the business of AI upgrades​

This case crystallises a modern regulatory fault line: how incumbents monetize AI upgrades to essential, subscription-based software while meeting consumer-law obligations to be transparent and fair. The ACCC’s action targets the mechanics of customer choice presentation — not the mere fact of a price increase — and argues that those mechanics can be unlawful when they omit a material option.
For regulators, the Australian action signals an appetite to apply established consumer-protection rules to AI rollouts and subscription design. For companies, the takeaway is unambiguous: monetising AI is legitimate, but how you present choices, and when you disclose alternatives, may determine whether the rollout is lawful.
For consumers, the case is a reminder to scrutinise renewal notices, keep auto-renewal under control, and document digital interactions.
The coming months will test whether Microsoft’s documented public options will defeat the ACCC’s omission claim, or whether the regulator’s evidence of concealed choices will convince a court to impose remedies. Either way, the dispute will be studied closely by regulators, compliance teams, product designers, and subscription-economy businesses worldwide as they navigate the tricky terrain of integrating AI into products millions rely on.

---

Source: Floyd County Times Australia sues Microsoft over 'misleading' AI offer