ACCC Sues Microsoft Over Copilot Linked 365 Price Rise

Australia’s competition regulator has launched Federal Court proceedings accusing Microsoft of misleading roughly 2.7 million Australian Microsoft 365 customers after the company folded its Copilot generative‑AI assistant into consumer Microsoft 365 Personal and Family plans and raised renewal prices — a dispute that now tests how subscription UX, price communication and consumer law collide in an age of paid AI features.

Background​

Microsoft introduced Copilot as a consumer-facing generative AI assistant and began integrating it into Microsoft 365 Personal and Family subscriptions in late 2024, applying the change in Australia on 31 October 2024. As part of that move the company adjusted retail pricing for affected consumer SKUs: the annual Microsoft 365 Personal price rose from A$109 to A$159 (≈ +45%) and Microsoft 365 Family from A$139 to A$179 (≈ +29%). These headline numbers are central to the Australian Competition and Consumer Commission’s (ACCC) allegations.
The ACCC filed initiating court documents in the Federal Court on 27 October 2025, naming Microsoft Australia Pty Ltd and Microsoft Corporation as defendants and seeking declarations, injunctions, consumer redress and penalties under the Australian Consumer Law. The regulator’s concise statement includes screenshots it says show the existence of a lower‑priced “Classic” plan (Microsoft 365 Personal Classic and Microsoft 365 Family Classic) that was only surfaced late in Microsoft’s cancellation or account workflow.

---

What the ACCC alleges — the core claim​

• The ACCC says Microsoft sent two targeted emails to auto‑renewing subscribers and published a blog post notifying them that Copilot had been integrated and that renewals would occur at a higher price, unless they cancelled. The regulator alleges these communications conveyed a binary accept-or-cancel choice.
• According to the ACCC, Microsoft did not contemporaneously disclose a third option — the Classic plans — which allowed subscribers to keep the prior feature set and price without Copilot. The Classic options, the ACCC says, only appeared after a user initiated the cancellation flow.
• The regulator frames the harm as economic (millions of consumers may have paid materially higher renewals) and informational (consumers were denied the chance to make an informed choice). The ACCC chair has said many consumers “would have opted for the Classic plan had they been aware of all the available options.”

These are regulatory allegations; intent and systemic intent to deceive are matters for the Court to determine. The ACCC’s materials and press release are the primary public record for the claims the regulator says it will rely on.

---

Timeline and the factual record​

1. Late 2023: Microsoft begins broader public development and pilot work on Copilot products.
2. 31 October 2024: Copilot is integrated into Microsoft 365 Personal and Family subscriptions in Australia, according to ACCC filings.
3. January 2025: Microsoft’s global consumer rollout and public-facing support pages document the new Copilot-integrated plans and also reference alternative "Classic" SKUs as limited‑time no‑Copilot options.
4. 27 October 2025: The ACCC commences Federal Court proceedings, lodging a concise statement and releasing screenshots it says show the Classic option only appearing after a customer initiated cancellation.

Independent news organisations and the regulator’s own materials corroborate the core dates and the headline numbers used in the ACCC filing. Community reports and forum posts cited during the ACCC’s inquiry also document consumer confusion about where and when the Classic option was discoverable.

---

The product changes at issue — what customers actually faced​

Microsoft’s product changes involved at least three practical elements:

• Copilot integration: Copilot features were embedded across consumer Office apps — Word, Excel, PowerPoint, Outlook and Designer — and billed as a material enhancement to productivity features.
• Price realignment: Retail annual pricing for Personal and Family plans in Australia rose by the headline percentages (≈45% for Personal, ≈29% for Family), with Microsoft positioning price changes as linked to the added AI functionality.
• Classic SKUs and opt‑out mechanics: Microsoft created temporary “Classic” SKUs that preserved the pre‑Copilot feature set and price for existing subscribers who preferred not to receive Copilot features. The ACCC says those SKUs were not disclosed in the renewal communications and surfaced only deep in the cancellation path. Microsoft has pointed to public-facing blog and support pages that explain non-Copilot alternatives.

This is an important distinction: Microsoft’s published product documentation acknowledged non‑Copilot alternatives, but the ACCC’s allegation is about what consumers with automatic renewal were told at the moment they needed to act. That difference between published support content and the actual user experience is the heart of the regulator’s case.

---

Legal theory: omission, reasonable consumer and choice architecture​

The ACCC’s legal case is framed around three concepts familiar in consumer protection law:

• Material omission: Under the Australian Consumer Law, omitting information that would influence a consumer’s decision can be misleading conduct. The ACCC alleges Microsoft omitted the Classic option in the renewal notices.
• Reasonable consumer test: The regulator will ask whether a reasonable consumer reading Microsoft’s emails and blog post would have understood they had only two options (accept Copilot at the new price, or cancel) rather than a third, cheaper alternative.
• Choice architecture: The placement of options inside account flows can nudge consumer behaviour. The ACCC argues that surfacing the Classic option only within the cancellation UX effectively coerced consumers into accepting the upsell. The case implicitly tests whether particular UX design choices can legally constitute misleading conduct.

It is worth noting the burden of proof: the ACCC must demonstrate that the omission was likely to mislead a reasonable consumer and that the conduct contravened the ACL. Whether the ACCC can show systemic or deliberate concealment will depend on evidence uncovered during discovery. Microsoft has publicly said it is reviewing the ACCC’s allegations.

---

Microsoft’s likely defence and the evidentiary fault lines​

Microsoft’s public response to date is cautious: the company has said it is reviewing the ACCC’s claim and stresses its commitment to consumer trust and transparency. In practice, corporate defenses in cases like this tend to rest on several predictable pillars:

• Published disclosure: Microsoft can point to blog posts, support pages and help documentation that stated alternatives (including Classic plans and non‑Copilot options) were available. The company may argue those disclosures were sufficient and reasonably accessible.
• Variability in user experiences: Microsoft may argue account experiences differ by market, date, device, or whether a user visited specific account pages; proving a systemic omission across 2.7 million subscribers is harder than proving isolated instances.
• No intent to mislead: While intent is not required for a finding of misleading conduct under the ACL, Microsoft’s lawyers will likely emphasise the absence of deliberate deception and point to internal processes and legal review as evidence of good faith.

Key evidentiary fault lines the Court will examine include the exact wording of the emails and blog post, the timing and prominence of Classic plan disclosures, analytics or logs showing how many users saw the Classic SKU without going through cancellation, and internal communications that might reveal product or communications strategy.

---

Potential remedies and penalties​

The ACCC is seeking a range of remedies available under the ACL: declarations, injunctions, consumer redress and civil penalties. For corporations, the maximum penalty for each contravention is the greater of A$50 million, three times the benefit obtained, or 30% of adjusted turnover during the relevant period — though any eventual penalty will depend on the Court’s findings and the remedial framework the Court applies.
Practical consequences if the ACCC succeeds could include:

• Refunds or partial refunds to affected customers.
• Court-ordered compliance measures around how subscription changes are communicated, possibly including more prescriptive disclosures.
• Significant financial penalties if the Court finds serious contraventions and quantifiable benefits obtained.

---

Broader regulatory context: subscription transparency and AI monetization​

This lawsuit sits inside a wider regulatory and market context where subscription models, default renewals and AI monetization are increasingly scrutinised:

• Regulators worldwide have signalled greater interest in how tech companies communicate price and feature changes for subscription products. The ACCC action is a visible example of that trend.
• Antitrust and consumer lawsuits related to AI and cloud deals are proliferating — for example, recent U.S. litigation alleges Microsoft’s exclusivity with OpenAI constrained compute supply and harmed ChatGPT customers, an antitrust suit that raises related questions about how dominant partnerships affect market prices and quality. Those broader competitions claims do not overlap perfectly with the ACCC’s consumer‑law theory, but they underline regulatory sensitivity to AI market structures.
• High-profile settlements and enforcement actions (such as large FTC cases and other national regulator interventions) show the appetite for heavy penalties where systemic deception or anticompetitive effects are found. The Microsoft case will be watched for whether courts treat UX design decisions as legally material disclosures.

---

Why this matters to consumers and product teams​

For consumers, the alleged conduct touches a daily pain point: subscription fatigue combined with automatic renewals makes it easy to end up paying more for features you neither wanted nor used. If the ACCC’s claims are upheld, it will emphasise that companies must present realistic alternatives — clearly and up front — when billing or feature changes affect recurring charges.
For product and legal teams, the case highlights several operational imperatives:

• Design disclosures for renewal notices and emails so that key options are explicit and discoverable at the moment consumers must choose.
• Treat choice architecture as a legal risk area, not only a UX optimization problem.
• Maintain contemporaneous records showing where and how subscription alternatives were offered to specific customer cohorts.

---

Risks and weaknesses in the ACCC’s case​

The ACCC’s complaint is careful, but it faces several practical risks:

• Demonstrating the aggregate impact on 2.7 million subscribers requires robust data: did those accounts actually renew at the higher price because the Classic option was hidden, or did other behavioural factors (value perception, marketplace inertia) explain the outcomes? The ACCC will need solid transactional evidence.
• Microsoft’s published blog and support materials acknowledging Classic SKUs complicate a straightforward narrative of concealment; the regulator must show those disclosures were insufficient in the specific renewal communications.
• Proving deliberate concealment is a high bar; while intent is not always necessary to prove misleading conduct, internal documents and communications will be determinative. If Microsoft can show reasonable administrative or product reasons for how the Classic SKUs were surfaced, the ACCC’s case may narrow to isolated failings rather than systemic deception.

When evaluating the case, courts will look to whether the average auto‑renewing subscriber reading the email and blog post would likely have been misled about the availability of the Classic option. That is an inherently contextual and evidentiary inquiry.

---

Parallel litigation and regulatory momentum​

This lawsuit follows a string of high-profile regulatory actions and private suits that suggest a tightening regulatory environment for big tech in subscription and AI spaces:

• Amazon’s multi‑billion dollar settlements and regulatory scrutiny for subscription and consumer practices have set a tone that regulators will pursue large remedies for systemic customer harms.
• Recent U.S. antitrust litigation alleging Microsoft used exclusive cloud deals to influence pricing and quality in the consumer AI market shows the breadth of legal risk for large cloud/AI partnerships. Those claims are distinct from the ACCC’s consumer‑law claim but contribute to cross‑jurisdictional regulatory attention on similar corporate conduct.

The cumulative effect is clear: regulators and plaintiffs are more willing to challenge the interplay of product design, default billing and AI monetization.

---

Practical guidance for affected consumers​

If you are an Australian Microsoft 365 Personal or Family subscriber and are unsure whether you paid more than you should have:

1. Check your subscription renewal dates and the price you were charged at the time of renewal.
2. Inspect any emails or blog posts Microsoft sent around the renewal date; save screenshots of your account pages showing plan options. This will be useful for any ACCC redress processes or private claims.
3. If you believe you were misled, the ACCC has said it will seek consumer redress; affected customers should monitor ACCC guidance and register complaints with the regulator if appropriate.
4. Consider alternative productivity suites or monthly billing options if you wish to avoid large annual renewals in future.

Consumers who have not renewed since early July 2025 may still be able to access Classic plans by following the account cancellation flow, according to ACCC commentary — but that availability depends on Microsoft’s current account options and can change.

---

What to watch next​

• Preliminary Court filings and Microsoft’s formal defence: whether Microsoft contests the ACCC’s factual claims or focuses on narrowing legal theories.
• Discovery: internal emails, analytics and product‑team documents will be pivotal; these materials can show whether the Classic SKU discovery timing was deliberate or an unfortunate UX oversight.
• Remedies: whether the Court orders systemic remedies (clearer disclosures, compliance reporting) in addition to any consumer redress or penalties.
• Cross-jurisdictional fallout: other regulators will watch closely. Clear rulings here could influence enforcement approaches in Europe and North America around subscription UX and AI monetization.

---

Conclusion​

The ACCC’s Federal Court action against Microsoft tests a fundamental tension of the subscription era: companies can and will integrate new features that justify price changes, but they must communicate those changes transparently at the moment consumers decide whether to accept them. The regulator’s allegation—that Microsoft effectively hid a lower‑priced Classic option until customers entered a cancellation flow—transforms a UX design choice into a potential legal liability under consumer law.
This case will be closely followed by product teams, lawyers and regulators worldwide because its outcome could set an influential precedent about how firms must present subscription choices when adding AI features. It also highlights a broader shift: choice architecture matters not only for conversion rates, but for legal compliance and consumer trust. The Federal Court’s findings will determine whether Microsoft’s communications crossed that legal line, and the judgment will reverberate across the tech industry’s approach to AI monetization and subscription transparency.

---

Source: CX Today Microsoft Faces Legal Action After Allegedly Misleading 2.7 Million Copilot Customers

 

[ChatGPT]

Microsoft’s consumer-facing Copilot rollout has landed the company in a high‑stakes Federal Court battle in Australia after the Australian Competition & Consumer Commission (ACCC) alleged the firm misled roughly 2.7 million Microsoft 365 subscribers by obscuring a lower‑cost “Classic” alternative while pushing users toward upgraded, AI‑enabled plans.

Background and overview​

Microsoft announced that its generative‑AI assistant Copilot would be integrated into Microsoft 365 consumer subscriptions and adjusted consumer pricing in late 2024 and early 2025. The ACCC says the consumer rollout for Microsoft 365 Personal and Family took effect on 31 October 2024, and that Microsoft publicly communicated the inclusion and new pricing in January 2025.
The regulator’s complaint centers on three customer‑facing communications — a blog post and two targeted emails to subscribers with auto‑renew enabled — and a user flow that, the ACCC says, gave the false impression that customers had only two choices at renewal: accept a Copilot‑integrated subscription at the higher price or cancel. The ACCC alleges Microsoft failed to disclose a contemporaneous third option: Microsoft 365 Personal Classic and Microsoft 365 Family Classic, which preserved the prior feature set and price without Copilot.

What the ACCC is alleging — facts, timeline and numbers​

The factual core​

The ACCC’s concise statement and initiating court documents set out the sequence the regulator says consumers experienced:

• Microsoft announced Copilot’s inclusion and new prices and sent renewal notices to auto‑renewing subscribers.
• The notices indicated renewals would occur at higher prices unless customers cancelled before a cut‑off date.
• The Classic no‑Copilot plans, the ACCC says, were not disclosed in those renewal communications and only appeared late in the cancellation flow after a subscriber began the cancellation process.

Headline numbers under dispute​

The complaint highlights substantial headline price rises in Australia that underpin the regulator’s economic‑harm case:

• Microsoft 365 Personal: A$109 → A$159 (≈ 45% increase).
• Microsoft 365 Family: A$139 → A$179 (≈ 29% increase).

The ACCC estimates roughly 2.7 million Australian accounts were affected, a figure repeated across the regulator’s materials and independent reporting.

Key dates​

• 31 October 2024 — Copilot integrated into Microsoft 365 consumer plans in Australia (ACCC’s cited date).
• January 2025 — wider public communications and rollout notes.
• 27 October 2025 — ACCC commenced Federal Court proceedings against Microsoft Australia Pty Ltd and Microsoft Corporation.

Legal framework and potential penalties​

Under the Australian Consumer Law, it is unlawful to engage in conduct that is false, misleading or deceptive, which includes omissions of material information that are likely to mislead consumers. The ACCC’s case is framed on the theory that Microsoft’s renewal communications omitted a material alternative and therefore conveyed a misleading impression to a reasonable consumer.
Penalties for contraventions are substantial: for each breach the maximum civil penalty is the greater of A$50 million, three times the total benefit reasonably attributable to the breach, or 30% of adjusted turnover during the breach period where the benefit cannot be determined. The ACCC is seeking injunctions, declarations, consumer redress and costs in addition to penalties.

The evidence the ACCC relies on​

The ACCC’s initiating materials include:

• Screenshots of the communications and the account cancellation flow showing where the Classic option appeared.
• Two targeted subscriber emails and a blog post published by Microsoft that announced Copilot and the price changes.
• Hundreds of consumer complaints, forum posts and other user reports collected during the investigation.

Those materials form the factual backbone of the ACCC’s allegation that the Classic option was effectively hidden from many users at the moment they needed to make a renewal decision.

Microsoft’s likely defence and the factual gap​

Microsoft has said it is reviewing the ACCC’s claims and has publicly documented product pages and support notes describing the Copilot rollout and alternatives, including temporary Classic SKUs and non‑Copilot options. Microsoft’s defence will likely be that alternatives were disclosed and accessible, and that the evidence in the ACCC’s materials does not show deliberate concealment or misleading conduct as a matter of law.
The case therefore hinges on a narrow but legally significant factual gap: published documentation versus the actual experience of auto‑renewing subscribers who received the targeted emails. The regulator’s contention is that, regardless of the public documentation, the messages that mattered to those subscribers omitted the Classic option. That distinction — communications in the moment versus publicly available support pages — is central to how Australian courts assess omissions and misleading impressions.

---

Why regulators care: transparency, choice architecture and “dark patterns”​

The ACCC frames the alleged conduct not only as an economic wrong (millions paying higher renewals) but as an information injury — consumers were denied a meaningful, timely chance to choose a lower‑cost alternative. This raises two linked regulatory concerns:

• Transparency: When a material product change (adding paid AI features) triggers a price rise, regulators expect companies to make alternatives and consequences obvious in the same communications that prompt renewal decisions.
• Choice architecture: UX design that places viable alternatives deep in a cancellation flow risks being treated as a manipulative tactic that creates a false impression of limited options. Regulator statements and the ACCC’s screenshots allege precisely that sequence.

If the Court finds Microsoft’s design and communications created a misleading impression, the judgment could crystallize legal limits on UX patterns that nudge consumers toward pricier tiers — a significant precedent for subscription businesses and product teams globally.

Global context — this is not an isolated controversy​

Microsoft is facing heightened regulatory and litigation scrutiny on multiple fronts tied to AI integration, bundling and market conduct:

• A US federal class action filed in California alleges Microsoft used exclusive compute arrangements with OpenAI to foreclose competition in generative AI markets.
• The US Federal Trade Commission is reportedly probing Microsoft’s AI and licensing practices.
• The Competition Commission of India is examining potential bundling of AI features in office software packages by Microsoft and Google under India’s Competition Act.
• The European Commission previously required Microsoft to offer Office 365/Microsoft 365 without Teams at a lower price and to improve interoperability to resolve antitrust concerns — demonstrating that bundling and tie‑ins draw regulator attention globally.

Taken together, these matters show a coordinated regulatory focus on how dominant tech firms structure pricing and feature bundles when adding AI capabilities to existing software. The ACCC’s lawsuit will be watched as part of that broader landscape.

Strengths in the ACCC’s case — what makes the regulator’s argument persuasive​

• Documented, time‑stamped communications: The ACCC isolates specific emails and a blog post as the communications to which subscribers were exposed, and it produces screenshots of the UX flows to show where the Classic option appeared. That concreteness strengthens the regulator’s ability to demonstrate what a reasonable consumer would have understood.
• Scale of alleged harm: With approximately 2.7 million affected accounts and large percentage price increases, the economic magnitude is substantial and easy to quantify for the Court to consider.
• Consistency with consumer reports: The ACCC drew from hundreds of consumer complaints and forum discussions; corroborating user reports that the Classic option was hard to find help establish the real‑world experience the regulator alleges.

Weaknesses and legal risks for the ACCC​

• Existence of public documentation: Microsoft published support pages and product notes describing Classic SKUs and alternatives. If Microsoft can show contemporaneous, accessible documentation and an adequate disclosure regime, the ACCC will have to prove that those public materials did not reach or were not reasonably available to consumers in the targeted renewal cohort.
• Burden of proof on perception: Australian consumer law focuses on whether conduct is misleading to the reasonable consumer. The ACCC must link the specific renewal communications to the actual impression created — a fact‑intensive inquiry that affords Microsoft defenses around clarity, timing and audience segmentation.

Broader business and product implications​

If the ACCC succeeds, companies will need to rethink several product and GTM practices when adding AI capabilities to subscription services:

• Disclosure parity: Material alternatives must be disclosed in the same communications that notify affected subscribers of price and feature changes. Product teams will no longer be able to rely exclusively on support pages or buried FAQs.
• UX auditability: Firms should maintain logs and screenshots of the customer journeys shown to specific cohorts (e.g., auto‑renewing subscribers) to demonstrate what was and wasn’t visible at decision points.
• Opt‑in vs opt‑out design: Regulators will scrutinize designs that convert a meaningful opt‑in decision into an opt‑out default through opaque cancellation flows. Clear, affirmative choices about added paid AI features will be safer legally and better for customer trust.

What could happen next — likely procedural and practical outcomes​

• The Federal Court will determine whether the emails and blog post, in context, conveyed a misleading impression to a reasonable consumer.
• If the Court finds contraventions, remedies could include declarations, injunctions (ordering clearer disclosures), consumer redress (refunds or adjustments), and monetary penalties up to the statutory maxima.
• A settlement is possible; regulators often secure negotiated outcomes that include consumer remediation and procedural undertakings without protracted appeals. However, given the public‑interest framing, the ACCC may prefer a public judgment to clarify law around AI and subscription disclosures.

Practical advice for consumers and enterprise buyers​

• Review renewal notices and account settings for any subscription that adds AI features or changes billing terms. The ACCC’s case is a reminder that the communications you receive at renewal are legally significant.
• If you prefer older feature sets without AI, check for explicit “Classic” or non‑AI SKUs before renewing. If those options aren’t obvious, document the sequence (screenshots, emails, timestamps). Such documentation can be important in seeking redress or disputing charges later.
• For organizations buying at scale, insist on written contract terms that specify whether AI features are optional and whether price changes will apply automatically to existing subscriptions. Enterprises should negotiate explicit carve‑outs or transition options.

Critical analysis — strengths of the case and unresolved questions​

The ACCC’s approach is strategically focused: it pairs clear documentary evidence (emails and screenshots) with a legal theory — omission and misleading impression — that has traction under Australian Consumer Law. The magnitude of the price hikes and the large affected cohort make the alleged harm tangible and politically resonant. That combination gives the ACCC a strong opening position.
However, the matter is fact‑specific. Microsoft’s published product pages and public communications provide a ready counter‑narrative: alternatives existed and customers could access them. The outcome will depend on granular questions about what specific subscribers saw at the moment they were asked to accept or cancel. If Microsoft can show contemporaneous, clear disclosures to the targeted cohort, the Court may find the communications were not misleading as a matter of law.
Finally, intent is legally irrelevant in many misleading‑conduct cases; the controlling issue is the impression created, not Microsoft’s motive. The ACCC will thus focus on the consumer experience rather than proving a deliberate scheme. Conversely, Microsoft will emphasize transparency policies and the existence of alternative SKUs to rebut the impression claim.

What this means for the future of AI in consumer software​

The ACCC’s action signals a broader regulatory willingness to treat AI feature rollouts as material changes with legal consequences for how they are communicated. Firms that bundle AI into existing products should anticipate closer scrutiny of:

• Pricing transparency when AI features are introduced.
• UX choices that make alternatives inconvenient to find.
• Documentation and audit trails showing what different customer cohorts were told and when.

This case could become a touchstone for global regulators trying to draw legal lines around subscription changes and AI monetization strategies. A finding in favour of the ACCC would push companies to design affirmative opt‑in mechanisms and explicit, contemporaneous disclosures for paid AI features; a finding for Microsoft would leave more latitude for firms to rely on published documentation and in‑product flows. Either way, design teams, legal counsel, and compliance functions will need to work more closely than ever.

Conclusion​

The ACCC’s lawsuit against Microsoft is a pivotal test of how consumer protection law applies to subscription‑driven AI upgrades. By alleging that Microsoft’s renewal communications created a false impression that left subscribers with only an "accept or cancel" choice, while the lower‑cost Classic alternative was effectively hidden, the ACCC has framed a dispute that combines consumer rights, UX design, and the economics of AI monetization. The Court’s decision will reverberate beyond Australia, informing how technology companies disclose pricing and optional AI features and shaping the design rules for subscription services in an AI era.

---

Source: MediaNama Microsoft Faces Lawsuit In Australia For Misleading Consumers