ACCC Sues Microsoft Over Copilot Price Hike Misleading Australians

Australia’s competition watchdog has launched a high-stakes legal attack on Microsoft, alleging the company misled roughly 2.7 million Australian users by concealing a lower-cost “Classic” Microsoft 365 option when it rolled Copilot into consumer subscriptions and raised prices—an action the ACCC says denied consumers a meaningful choice and may breach the Australian Consumer Law.

Background​

Microsoft began integrating its generative AI assistant, Copilot, into consumer Microsoft 365 plans in late 2024 and completed a broader global rollout in January 2025. The company framed the change as a value-add across Word, Excel, PowerPoint, Outlook and other consumer-facing apps, and announced corresponding price adjustments for consumer subscriptions.
In Australia, the Australian Competition and Consumer Commission (ACCC) says Microsoft told subscribers with auto-renew enabled that their choices were to accept Copilot and the higher renewal price, or to cancel their subscription. The ACCC alleges Microsoft omitted a third option—the Microsoft 365 Personal and Family Classic plans—which would have allowed customers to retain existing features without Copilot at the prior, lower price. The regulator commenced proceedings in the Federal Court on 27 October 2025.
The ACCC’s public statement quantifies the alleged impact: annual Microsoft 365 Personal rose from AUD 109 to AUD 159 (a 45% increase), and Family rose from AUD 139 to AUD 179 (a 29% increase), with approximately 2.7 million customers affected. The regulator is seeking penalties, consumer redress, injunctions and costs.

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What the ACCC is alleging, in plain terms​

The core claim​

The ACCC contends Microsoft’s communications—specifically two emails and a blog post sent to auto-renewing subscribers—conveyed a binary choice: accept Copilot (and pay more) or cancel. The regulator says that representation was false or misleading because Microsoft had already prepared and was offering a distinct “Classic” plan that would let customers keep their existing feature set and price. The ACCC asserts this omission changed the decision environment for millions of users.

The legal leverage​

Under the Australian Consumer Law, corporations face significant maximum penalties for each contravention: the greater of AUD 50 million, three times the benefit obtained from the conduct, or 30% of adjusted turnover during the breach period. The ACCC’s action therefore carries potential for substantial financial consequences, but any penalty will depend on the Court’s findings.

Evidence the ACCC will rely on​

The ACCC’s case identifies three communications as central evidence: two targeted emails and a public blog post notifying subscribers of the Copilot integration and price increase. The regulator alleges Microsoft did not include a clear, contemporaneous disclosure of the Classic plan option in those materials and instead only exposed that option during the cancellation process. The ACCC has uploaded a concise statement and initiating court documents with the claim.

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Microsoft’s public position​

Microsoft has said it is reviewing the ACCC’s claim and remains committed to working constructively with the regulator. In earlier public-facing material, Microsoft explicitly stated that existing subscribers with recurring billing could switch to plans without Copilot—such as Microsoft 365 Basic—or to the new Microsoft 365 Personal Classic and Family Classic plans for a limited time. Microsoft’s consumer-facing blog and support pages describe the Copilot rollout and the availability of Classic plans as an option for subscribers.
That statement from Microsoft frames the dispute: the company points to published blog and support content that mentions Classic plans and opt-out pathways, while the ACCC alleges those disclosures were insufficient, not visible or not provided in the specific communications that accompanied the price change for auto-renewing subscribers.

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Why this case matters: consumer law, subscriptions, and AI monetization​

The lawsuit is a bellwether for how regulators will police AI monetization within subscription services. Tech giants increasingly fold AI features into existing product tiers while shifting price and licensing structures. Regulators are scrutinizing whether consumers receive transparent, timely and actionable information when those changes affect billing and privacy.
Key issues at stake:

• Transparency in subscription changes: Did Microsoft present all realistic options to customers in the communications that mattered—particularly those with auto-renew active—so consumers could make an informed decision?
• Timing and placement of disclosure: Was mention of the Classic plan front-and-center when notifying subscribers, or only discoverable deeper in account settings or the cancellation workflow?
• Fairness of default pathways: Auto-renewing accounts are particularly sensitive; regulators want to know whether default renewal choices were presented fairly or in a way that nudged customers toward higher-priced, AI-enabled plans.
• Precedent for AI feature rollouts: The decision could shape how other companies disclose AI upgrades and price changes to subscription users globally.

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Evidence and counter-evidence: a critical look​

Strengths of the ACCC’s case​

• Concrete communications: The ACCC bases its claims on specific Microsoft emails and a blog post—discrete artifacts that can be examined for language, prominence and omission. That gives regulators stronger footing than cases relying on more diffuse evidence.
• Quantified consumer impact: The alleged price increases and the size of the affected user base (2.7 million) create measurable consumer harm, which aligns with enforcement priorities focused on widespread deceptive conduct.
• Regulatory appetite and precedent: The ACCC has taken on large technology companies in prior enforcement actions, showing willingness and capability to pursue complex digital-economy cases through the Federal Court.

Weaknesses and defenses Microsoft may raise​

• Published support materials: Microsoft publicly documented Copilot’s inclusion and the availability of Classic plans in blog posts and support pages, and it may argue these constituted reasonable notice to consumers. The company is likely to emphasize that switching options were available and that Classic plans were offered explicitly.
• Ambiguity about consumer expectations: A court will need to determine what a reasonable consumer would understand from Microsoft’s communications—did the initial messaging actually suggest a binary choice, or would an ordinary user recognize alternative plans existed? That standard can be contested.
• Intent vs consequence: The ACCC alleges Microsoft deliberately omitted references to Classic plans; proving intentional concealment is harder than proving misleading conduct. The company may assert any omission was an oversight, a product of rollout complexity, or justified by limited-time offers and market communication choices.

What remains unverified​

• Microsoft’s internal decision-making: The ACCC’s concise statement alleges concealment to drive customers to higher-priced plans. Evidence of deliberate strategy—board-level directives, internal emails or marketing plans—would be decisive but is not publicly available. Any claim about Microsoft’s motives should be treated as unverified until the court process uncovers internal documentation or reliable testimony.

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Practical implications for Microsoft and subscribers​

What Microsoft could face​

• Financial penalties that could range widely depending on how courts quantify harm and benefit.
• Orders for consumer redress (refunds, credits or restitution) if the court finds consumers were misled.
• Injunctions or mandated changes to how subscription changes are communicated.
• Heightened regulatory scrutiny in other jurisdictions, potentially sparking follow-on inquiries from consumer protection agencies in Europe, North America or Asia.

The ACCC explicitly noted the possible scale of penalties under Australian law, which can be substantial relative to corporate revenue and reputational risk.

What subscribers should know​

• Microsoft indicated Classic plans and other non-Copilot options existed and offered switching routes for subscribers with recurring billing, but the accessibility and prominence of those options are now disputed.
• Consumers impacted by the rollout and price increase should keep records of notifications, renewal emails, and any steps taken in their account settings should they seek restitution or want to monitor the court outcome.
• The case highlights the importance of reading renewal notices carefully and reviewing subscription settings—especially when services undergo feature or pricing changes.

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Broader regulatory and market consequences​

This litigation signals a tougher posture by regulators toward subscription-based AI upgrades. Several longer-term consequences are likely:

• Stronger disclosure expectations: Regulators may demand clearer, standardized disclosures when AI features are added and price increases follow.
• Design of opt-out pathways: Companies may be required to present non-AI alternatives more prominently, possibly within initial notification messages rather than buried in account flows.
• Global ripple effects: A loss for Microsoft in Australia could embolden regulators elsewhere, prompting similar investigations or coordinated enforcement efforts.
• Consumer advocacy momentum: Consumer groups may press for statutory reforms that tighten rules around automatic renewals and product modifications in digital subscriptions.

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How courts typically assess these claims​

Australian courts assess misleading or deceptive conduct by reference to the impression conveyed to a reasonable person. Key factors include:

• The precise wording and presentation of communications.
• The context—timing, target audience (auto-renewing subscribers) and the medium (email, blog post).
• The availability and visibility of alternative options at the time of communication.
• Any internal evidence suggesting deliberate omission or intent to obscure choices.

If court findings favor the ACCC, remedies can include penalties, injunctions and redress; if not, Microsoft may avoid major sanctions but still face reputational and regulatory consequences.

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Timeline and what to watch next​

• Early stages: The ACCC filed the concise statement and initiating documents on 27 October 2025. The initial steps will include pleadings, discovery requests and directions hearings.
• Discovery: This phase could surface internal Microsoft communications and data about subscriber flows and clickpaths—evidence that may prove or disprove the ACCC’s claims about the timing and prominence of the Classic option.
• Hearing/trial: If the case proceeds to a contested hearing, the court will weigh documentary and testimonial evidence to determine whether representations were misleading.
• Potential settlement: High-profile enforcement matters sometimes resolve by negotiated settlement before a final judgment, often including undertakings, financial redress and commitments to change practices.

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Wider context: AI features, pricing and consumer expectations​

The Microsoft/Copilot dispute sits within a broader industry shift: vendors increasingly bundle AI features into existing products, and subscription economics are changing as companies seek new revenue streams to support expensive AI infrastructure.

• Companies must balance innovation with transparent customer communications.
• Consumers expect clarity about what they pay for, which features are optional, and how to keep prior functionality without being forced into premium tiers.
• Regulators are paying attention to the intersection of AI feature rollouts and consumer protection norms—especially where automatic renewals can lock consumers into new pricing regimes.

This case will be closely watched by product managers, compliance officers, regulators and consumer advocates because its outcome could define acceptable disclosure practices for AI-driven product changes.

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Critical assessment: strengths, risks and unanswered questions​

Notable strengths of the ACCC action​

• The complaint is tightly focused on specific communications and measurable price changes affecting a discrete cohort of subscribers.
• The alleged consumer harm—substantial price increases for millions of users—gives the case clear public-interest weight.
• The ACCC’s established enforcement toolkit and recent successes against large tech companies increase the likelihood of rigorous litigation.

Potential risks and limitations for the ACCC​

• Demonstrating intentional concealment will be a higher bar than proving misleading conduct generally; the former requires evidence of internal strategy or directives.
• Microsoft’s public help documentation and blog posts referencing Classic plans provide the company with defensible factual material that may undercut claims of a complete omission.
• The question of what constitutes reasonable notice in the context of global rollouts and staggered regional communications may be subject to interpretation.

Key unanswered questions​

• What did the two targeted emails actually say in full, and how prominent was any mention of alternatives?
• How and when was the Classic plan introduced internally and externally, and did Microsoft intend the Classic plan to be a long-term alternative or a short-term transitional measure?
• What will discovery reveal about Microsoft’s internal product and communications planning around Copilot’s integration?

These questions will shape the evidentiary phase and ultimately whether the Court finds that Australian consumers were misled.

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Practical takeaways for product teams and consumer-facing businesses​

Companies planning AI-enabled product upgrades and pricing changes should consider the following best practices:

• Lead with clarity: Put alternative options and their relative prices in the opening lines of renewal communications.
• Prominent opt-outs: Make non-AI and legacy-plan options obvious within the same communication and not only in buried settings or cancellation flows.
• Document decisions: Keep clear internal records explaining why certain communications were chosen, including legal reviews and consumer-impact assessments.
• Audit communication funnels: Test the cancellation and renewal UX to ensure alternatives aren’t discoverable only to users who are already canceling.
• Prepare for scrutiny: Assume regulators will ask for evidence about consumer notices, the design of account flows, and how long and where alternatives were visible.

Those steps reduce legal risk and preserve consumer trust—two invaluable assets when monetizing new AI capabilities.

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Conclusion​

The ACCC’s lawsuit against Microsoft over the Copilot-enabled Microsoft 365 price changes raises foundational questions about how companies communicate product upgrades, price increases and opt-out options in an era when AI is being rapidly integrated into everyday software. The case is grounded in specific communications and quantifiable consumer impact, which gives regulators a strong factual basis to pursue enforcement. At the same time, Microsoft’s public documentation that referenced Classic plans and switching options provides the company with plausible defenses, and proving deliberate concealment will hinge on internal evidence that has not yet been made public. The litigation’s outcome will matter far beyond Australia: it may set a global standard for subscription transparency, influence how AI features are rolled into consumer products, and force technology companies to rethink how they present choices to customers when the bottom line is at stake.

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Source: theregister.com Australia sues Microsoft for misleading Microsoft 365 users