Microsoft’s consumer-facing Copilot rollout has produced a high‑stakes regulatory confrontation in Australia: the Australian Competition and Consumer Commission (ACCC) says roughly
2.7 million Microsoft 365 Personal and Family subscribers were misled about renewal choices after Copilot was bundled into those plans, and the dispute has now widened to include claims that Microsoft apologised and offered refunds to affected customers — a claim reported by some outlets but not yet clearly corroborated across all major public statements.
Background / Overview
Microsoft introduced Copilot — its generative‑AI assistant — into consumer Microsoft 365 Personal and Family subscriptions in a staged rollout that began in late 2024 and proceeded into early 2025. The ACCC says the Copilot integration became active in Australia on
31 October 2024, and that Microsoft adjusted retail prices for those consumer plans at the same time. The regulator’s concise statement quantifies the headline price changes as an increase from
A$109 to A$159 for Microsoft 365 Personal (≈ +45%) and from
A$139 to A$179 for Microsoft 365 Family (≈ +29%). The ACCC filed proceedings in the Federal Court on
27 October 2025, naming Microsoft Australia Pty Ltd and Microsoft Corporation as respondents and seeking remedies that include declarations, injunctions, consumer redress and civil penalties. The regulator’s central allegation is one of
omission and misleading conduct: it says Microsoft told auto‑renewing subscribers — by way of two targeted emails and a public blog post — that to maintain their subscription they “must accept the integration of Copilot and pay higher prices, or, alternatively, cancel.” The ACCC contends this messaging omitted a contemporaneous third option: a
Microsoft 365 Personal Classic or
Microsoft 365 Family Classic plan, which preserved the prior feature set and price without Copilot. According to the ACCC, the Classic options were not clearly disclosed in those renewal notices and were only surfaced late in a cancellation flow, effectively
hiding the less expensive alternative from many consumers. Why this matters legally: under the Australian Consumer Law, conduct that is false, misleading or deceptive — or that omits material information likely to influence a consumer’s decision — can attract substantial civil penalties and orders for consumer redress. The ACCC is pursuing remedies that include penalties up to the greater of A$50 million, three times the benefit obtained (if that can be assessed), or 30% of adjusted turnover during the breach period for each contravention alleged.
What the ACCC says, in plain terms
- The regulator identifies three central communications: two targeted emails to subscribers with auto‑renew enabled and a company blog post announcing Copilot’s inclusion and corresponding price changes.
- Those communications, the ACCC says, conveyed a binary choice to affected customers: accept the Copilot‑integrated plan at the higher price or cancel the subscription. The existence of Classic plans at the prior price was not disclosed in those communications.
- The Classic SKUs — which would have allowed customers to retain existing functionality without Copilot at the prior price — allegedly only appeared after a consumer had initiated the cancellation flow, according to screenshots and account‑flow captures lodged by the ACCC.
- The regulator estimates the cohort affected at approximately 2.7 million Australian subscribers and frames the conduct as both economic (people paid higher renewals) and informational (consumers denied a timely, clear choice).
These core allegations are grounded in a concise statement filed in court and supported, the ACCC says, by consumer complaints, internal screenshots and examples of the customer experience. Independent outlets including Reuters and national broadcasters summarised the ACCC’s filing and the 2.7‑million figure when the action was announced.
Microsoft’s public response — what is verified
Microsoft’s public posture in the immediate aftermath of the ACCC filing has been cautious. Company statements reported to the press say Microsoft is
reviewing the ACCC’s claim and has emphasised cooperation and a commitment to consumer trust and transparency, but they stop short of conceding the regulator’s legal characterisation. Major international outlets summarised Microsoft’s response as “reviewing the allegations.” Separately, an Australian news report has stated that Microsoft “apologised to customers and offered refunds” days after the ACCC’s action — and that Microsoft began contacting affected customers about “a subscription alternative that we could have communicated more clearly.” That claim is significant if accurate, but it appears in reporting derived from the Sydney Morning Herald and related outlets. At the time of writing, the regulator’s formal filings and Microsoft’s main public statements do not themselves present a detailed, company‑level admissions package or a public, full‑scale refund roadmap; consequently, the apology/refund claim should be treated cautiously until Microsoft’s own publicly available communications or an ACCC enforcement outcome corroborate it. Flagging an important journalistic caveat: the assertion that Microsoft has formally apologised and is issuing refunds appears in specific media coverage; however, the ACCC’s public release and major wire services summarise the legal complaint rather than documenting an immediate corporate apology or a blanket refund program. Where a single outlet reports an extraordinary company move, cross‑checking is essential — and where an independent corroboration isn’t visible in official filings or multiple news wires, the claim should be presented as reported but not yet independently verified.
The legal anatomy: omission, choice architecture and consumer law
This case pivots on a classic consumer‑protection theory: a material omission can be as misleading as an affirmative falsehood if the omitted fact would likely affect a reasonable consumer’s decision. The ACCC’s contention is that by not disclosing the Classic plan option in the renewal notices, Microsoft created a
binary framing — pay up for Copilot or cancel — that deprived auto‑renewing customers of a visible, contemporaneous option to stay on the prior price without Copilot. Why UX design and
choice architecture matters here
- If the Classic option only became visible after a consumer started the cancellation process, the timing and placement of the disclosure materially change user decisions. This is a textbook example of a nudge through interface design: the visibility of alternatives and the friction required to find them will meaningfully affect outcomes.
- Australian consumer law applies a “reasonable consumer” test: what impression would the average auto‑renewing subscriber take away from Microsoft’s renewal communications? If the answer is that customers reasonably thought the only practical options were to accept the higher price or cancel, the ACCC argues that omission becomes actionable.
Potential legal exposure
- The ACCC asks for declarations, injunctions, consumer redress and penalties. The maximum statutory penalty framework under the Australian Consumer Law means financial exposure could be very significant if the Court finds contraventions and quantifies benefits obtained by Microsoft as a result.
- The case also invites non‑monetary remedies: court orders requiring improved disclosure practices and tighter controls on subscription communications would have ongoing compliance implications for Microsoft and any company that uses similar UX tactics.
Microsoft’s likely defenses
- Adequacy of published notices — Microsoft can point to its blog posts, support pages and other public documentation that describe Classic plans and in‑app controls for Copilot.
- Availability versus visibility — Microsoft may argue that alternatives were accessible (e.g., via account management or support), and that any failure to notice them does not equate to a systematic concealment.
- Lack of culpable intent — The ACCC must establish that the omission was materially misleading; Microsoft may contend the communications were not intended to mislead and that any confusion was unintentional or limited in scope.
Practical guidance for affected consumers
If you are a Microsoft 365 Personal or Family subscriber in Australia and are concerned about whether you were moved to a Copilot‑integrated, higher‑priced plan without an obvious alternative shown to you, these are steps to check and act:
- Sign in to your Microsoft account at account.microsoft.com and go to Services & Subscriptions.
- Locate your Microsoft 365 subscription entry and click Manage.
- Look for a Cancel subscription or Change plan workflow — according to Microsoft’s support pages and ACCC screenshots, the Classic plan option could be surfaced during the cancellation path.
- If you see Microsoft 365 Personal Classic or Microsoft 365 Family Classic, select it to retain prior features without Copilot at the previous price (if that option is still being offered).
- If you cannot find an option or if your subscription already renewed at the higher price, contact Microsoft Support and ask to either switch to the Classic SKU or to enquire about refunds/redress options. Keep screenshots of any emails or account pages you received as evidence.
If the ACCC obtains consumer redress orders, the regulator’s action could produce an official claims process; in the meantime, keep documentation and follow Microsoft’s published support routes. The ACCC’s public material and press coverage contain practical steps customers used to identify the Classic flow; those resources remain useful for self‑help even as the litigation proceeds.
Why this matters to tech companies and regulators
The ACCC’s case is more than an Australian‑specific dispute about pricing: it tests how consumer law applies to modern subscription models and the monetisation of AI features. A few consequences to watch:
- Precedent for subscription UX: a finding for the ACCC would clarify that where and when alternatives are disclosed in an account flow is a legal question, not merely a product design choice. Hidden alternatives that only appear late in cancellation flows can be treated as material omissions.
- Global regulatory appetite: consumer authorities in other jurisdictions — particularly Europe and North America — are actively watching how AI features are monetised and how subscription changes are communicated. Fines, compliance orders and reputational fallout in Australia could catalyse similar inquiries elsewhere.
- Design and compliance discipline: companies will need to apply legal review to UX changes that affect price or contractual terms, document decision rationale, and ensure conspicuous, timely disclosure of less expensive or opt‑out alternatives. The era of paid AI features increases the stakes for subscription transparency.
Strengths and weaknesses of the ACCC’s case — a critical appraisal
Notable strengths
- Scale and specificity: the regulator quantifies the cohort (≈2.7 million) and cites concrete price increases and dated communications, giving the Court a clear factual substrate to assess the “reasonable consumer” question.
- Documentary evidence: screenshots of the cancellation flow and copies of the renewal emails and blog post are included in the initiating materials, which helps translate UX claims into demonstrable facts.
- Legal clarity on omissions: Australian consumer law treats omissions that create misleading impressions as unlawful; the ACCC’s legal theory is a recognized and powerful one when supported by evidence.
Possible weaknesses and defenses
- Public availability of alternatives: Microsoft can point to public blog posts, support pages and in‑app settings that documented Classic plans and Copilot controls, arguing that the alternatives were not concealed but were instead made available in branded support material. If the Court sees these as sufficient disclosure, the ACCC’s omission theory weakens.
- Heterogeneity of user experience: subscription flows can vary by purchase channel, device, account type or timing; Microsoft may argue that the evidence does not show a systemic concealment across the affected population. Demonstrating systemic reliance on a buried cancellation path will be central to the ACCC’s burden.
- Proving consumer reliance and harm: the ACCC must link the omission to actual decisions taken by consumers who were materially harmed (e.g., renewed at higher price when they would have chosen Classic). Quantifying individual intent or likely choice ex post is factually challenging and may require statistical or sampling evidence.
Broader risks for Microsoft beyond the legal claim
- Reputational risk: allegations of deliberately burying cheaper alternatives strike at trust — particularly around paid AI features that many users may not want or need. The PR fallout is immediate and potentially enduring.
- Regulatory ripple effects: a significant penalty or redress order could embolden other jurisdictions to pursue similar actions and increase regulatory scrutiny of AI monetisation strategies.
- Operational changes and compliance costs: if the Court finds in favour of the ACCC, Microsoft will likely need to change how it designs renewal notices, emails, in‑app messaging and cancellation flows — and those changes will require investment in legal review, UX redesign and compliance monitoring.
What to watch next
- The Federal Court’s docket activity and any interim orders sought by the ACCC (for example, any immediate injunctions or preservation orders).
- Whether Microsoft issues a formal, public apology and a detailed refund or remediation plan in writing, or whether any refunds reported in press accounts are limited, voluntary, or provisional. Media reports suggest an apology and customer contact in some cases, but that claim requires independent confirmation through Microsoft’s own public statements or an ACCC enforcement outcome.
- How other competition and consumer agencies respond in their jurisdictions; look for statements or inquiries from regulators in the EU, UK and the United States about similar subscription tactics.
Conclusion
The ACCC’s action against Microsoft over the Copilot integration into Microsoft 365 Personal and Family plans is a consequential test of how modern subscription changes — particularly those tied to monetised AI features — must be communicated to consumers. The regulator’s allegations are precise and wide‑ranging: roughly
2.7 million Australians, substantial price increases, and an alleged practice of surfacing a lower‑cost “Classic” alternative only late in a cancellation flow. Those facts underpin a legal theory of omission that, if proven, could lead to large penalties, court‑ordered redress and stricter disclosure obligations for subscription services. At the same time, reporting that Microsoft apologised and offered refunds to affected customers is notable but not yet uniformly corroborated across the regulator’s filings and the major wire services summarising the litigation. That specific claim should therefore be treated as
reported by certain outlets while readers await either a Microsoft press release or a formal resolution document that confirms the scope and mechanics of any refund program. The case will be watched closely by product teams, legal counsels and regulators worldwide — because it goes to the heart of how companies design user journeys and communicate price changes in the AI era.
Source: The Sydney Morning Herald
Microsoft apologises, offers refunds to 2.7 million Australians