Microsoft’s defence in the Australian Competition and Consumer Commission’s Microsoft 365 subscription case is now drawing a sharp line between a product update and a consumer choice. The company argues that adding Copilot to Microsoft 365 Personal and Family was a normal evolution of subscription software—not a separate product decision that required it to advertise a cheaper, non-AI alternative to every existing customer.
That argument will be tested in the Federal Court of Australia against the ACCC’s allegation that Microsoft misled roughly 2.7 million auto-renewing Australian subscribers. As detailed in the ACCC’s October 2025 concise statement, the regulator says Microsoft’s communications presented customers with a binary: accept Copilot integration and a higher subscription price, or cancel. The agency says a third route—Microsoft 365 Personal Classic or Family Classic—preserved the prior feature set and pricing without Copilot, but appeared only after a customer began cancelling.
The distinction matters well beyond Australia. Microsoft’s case rests on an increasingly common vendor proposition: a cloud subscription is not a fixed product, and feature changes are inherent in the bargain. The ACCC’s case instead concerns how choices are disclosed when that evolving subscription also becomes more expensive.
Microsoft’s defence, analysed by Australian law firm Maddocks, reportedly does not contest several basic facts behind the ACCC’s action. The company accepts the relevant price rises, acknowledges the October 2024 public announcement and subsequent customer emails, and does not dispute that those communications did not mention the Classic plans.
The price changes were substantial. The ACCC says Microsoft 365 Personal rose from A$109 to A$159 annually—a 45 percent increase—while Microsoft 365 Family went from A$139 to A$179, a 29 percent increase. Microsoft has said these were the first standard Australian price increases for the consumer plans since their introduction, apart from foreign-exchange adjustments.
The regulator is not alleging that Microsoft was forbidden from adding Copilot, redesigning its plans, or raising prices. ACCC Chair Gina Cass-Gottlieb made that distinction when proceedings began: businesses can change products and prices, but they must communicate services and pricing clearly enough for consumers to make an informed decision.
That turns the case into a dispute over the meaning of silence. If Microsoft tells subscribers that their renewal will cost more because the plan now includes Copilot, must it also volunteer an available lower-cost plan that retains their earlier subscription experience? Or can it reserve that plan for a cancellation journey as a retention mechanism?
For Windows and Microsoft 365 users, that proposition will sound familiar. Microsoft 365 is routinely updated with changes to Word, Excel, PowerPoint, Outlook, OneDrive and security features. Subscription customers do not generally receive a choice before each design change, feature rollout or service retirement. Microsoft’s defence tries to place Copilot in that established operational reality.
But the argument has a clear limit. The ACCC is unlikely to contest that subscriptions evolve. The contested point is whether a new feature bundle, accompanied by a large price increase, can be presented as the only way to keep Microsoft 365 when a lower-priced, no-Copilot alternative was in fact available.
The Court will probably focus on the overall impression of the original communications rather than on whether Microsoft was entitled to develop Copilot. If an ordinary recipient understood the message as “pay the new amount or lose your subscription,” the availability of a third option may be material even if that option was temporary, less prominently supported, or designed to discourage cancellation.
Microsoft also relies on wording in its emails that directed customers to manage their subscription or cancel through their Microsoft account. That may establish that subscribers had a route to further account options. It does not automatically establish that the prominent message accurately described the options available at renewal.
That characterisation is strategically important. If the Court accepts that Classic was essentially a discontinuing save offer rather than a genuine alternative on equal commercial terms, Microsoft can argue it had no duty to put the plan beside its mainline Microsoft 365 offering in a mass email campaign.
There is a practical logic to Microsoft’s position. Retention offers are common across consumer subscriptions, from broadband to streaming services. Companies frequently offer discounts, legacy plans or tailored conditions only after a cancellation signal, and they do not normally advertise every retention concession upfront.
Yet the ACCC’s pleadings make the Classic offer harder to treat as a simple personalised discount. According to the regulator, the plan retained existing subscription features, excluded Copilot, and preserved the pre-October 2024 price. More importantly, it was allegedly available to the same population of existing auto-renewing subscribers receiving the price-change emails.
That makes the question less about whether a supplier may make a retention offer and more about whether this particular offer was materially relevant to the choice the customer was told they had. An option can be temporary and still matter. It can lack future AI features and still be the option a customer prefers—especially if that customer neither wants Copilot nor wishes to absorb a 29 percent or 45 percent annual increase.
The timeline is still awkward for the defence. The ACCC’s case centres on messages sent from October 31, 2024, including a first renewal notice delivered at least 30 days before the next renewal and a second notice around seven days before it. If a subscriber renewed at the higher price during that window, a later support page may not cure the alleged earlier omission.
This is a familiar problem in consumer-law disputes involving dark patterns: an accurate detail may exist somewhere in the customer journey without neutralising a misleading dominant message earlier in that journey. The ACCC has specifically elevated manipulative and false practices in digital markets, including subscription traps, among its 2026–27 enforcement priorities.
For IT administrators, the consumer case also carries a broader warning about communication design. Self-service portals and account-management flows can contain a technically available choice that is effectively invisible to customers making a decision from an email, storefront, renewal screen or procurement notice. A legal outcome against Microsoft would not mean every plan permutation must appear in every email. It could, however, raise the risk of presenting a deliberately simplified choice set when an undisclosed alternative is cheaper and directly responsive to the stated customer decision.
That is not a side issue. Cross-border software services are commonly sold through local subsidiaries while product, billing, marketing and account-management systems are controlled elsewhere. The Court’s approach to responsibility could matter for other multinational platforms operating in Australia, particularly where Australian consumers contract locally but receive communications generated through global systems.
The substantive disclosure dispute remains the bigger issue, however. Microsoft must persuade the Court that Classic was different enough from the mainstream offering that withholding it from the original notices did not create a misleading impression.
A trial is expected in 2027, according to Maddocks. Until then, the case stands as an unusually clear test of whether “subscriptions change” can coexist with a duty to disclose a cheaper route that lets customers avoid the change.
That argument will be tested in the Federal Court of Australia against the ACCC’s allegation that Microsoft misled roughly 2.7 million auto-renewing Australian subscribers. As detailed in the ACCC’s October 2025 concise statement, the regulator says Microsoft’s communications presented customers with a binary: accept Copilot integration and a higher subscription price, or cancel. The agency says a third route—Microsoft 365 Personal Classic or Family Classic—preserved the prior feature set and pricing without Copilot, but appeared only after a customer began cancelling.
The distinction matters well beyond Australia. Microsoft’s case rests on an increasingly common vendor proposition: a cloud subscription is not a fixed product, and feature changes are inherent in the bargain. The ACCC’s case instead concerns how choices are disclosed when that evolving subscription also becomes more expensive.
Microsoft Does Not Dispute the Core Timeline
Microsoft’s defence, analysed by Australian law firm Maddocks, reportedly does not contest several basic facts behind the ACCC’s action. The company accepts the relevant price rises, acknowledges the October 2024 public announcement and subsequent customer emails, and does not dispute that those communications did not mention the Classic plans.The price changes were substantial. The ACCC says Microsoft 365 Personal rose from A$109 to A$159 annually—a 45 percent increase—while Microsoft 365 Family went from A$139 to A$179, a 29 percent increase. Microsoft has said these were the first standard Australian price increases for the consumer plans since their introduction, apart from foreign-exchange adjustments.
The regulator is not alleging that Microsoft was forbidden from adding Copilot, redesigning its plans, or raising prices. ACCC Chair Gina Cass-Gottlieb made that distinction when proceedings began: businesses can change products and prices, but they must communicate services and pricing clearly enough for consumers to make an informed decision.
That turns the case into a dispute over the meaning of silence. If Microsoft tells subscribers that their renewal will cost more because the plan now includes Copilot, must it also volunteer an available lower-cost plan that retains their earlier subscription experience? Or can it reserve that plan for a cancellation journey as a retention mechanism?
The Subscription Argument: Innovation Is Part of the Deal
Microsoft’s principal answer is that its consumer Microsoft 365 subscriptions have always been dynamic. As Maddocks describes the defence, Microsoft argues that delivering the latest innovations as they become available is central to the subscription model. In that framing, Copilot was not a bolt-on AI product forcing customers into a new purchase; it was an evolving collection of generative-AI apps and features within an existing service.For Windows and Microsoft 365 users, that proposition will sound familiar. Microsoft 365 is routinely updated with changes to Word, Excel, PowerPoint, Outlook, OneDrive and security features. Subscription customers do not generally receive a choice before each design change, feature rollout or service retirement. Microsoft’s defence tries to place Copilot in that established operational reality.
But the argument has a clear limit. The ACCC is unlikely to contest that subscriptions evolve. The contested point is whether a new feature bundle, accompanied by a large price increase, can be presented as the only way to keep Microsoft 365 when a lower-priced, no-Copilot alternative was in fact available.
The Court will probably focus on the overall impression of the original communications rather than on whether Microsoft was entitled to develop Copilot. If an ordinary recipient understood the message as “pay the new amount or lose your subscription,” the availability of a third option may be material even if that option was temporary, less prominently supported, or designed to discourage cancellation.
Microsoft also relies on wording in its emails that directed customers to manage their subscription or cancel through their Microsoft account. That may establish that subscribers had a route to further account options. It does not automatically establish that the prominent message accurately described the options available at renewal.
The “Classic” Plans Become the Central Fact
Microsoft’s second major argument is more commercially direct: Microsoft 365 Classic was not an ordinary third plan. It was, Microsoft says, a time-limited retention offer for customers already moving to cancel. It reportedly describes the Classic plans as static legacy offerings that would not receive future AI-related updates and would ultimately be discontinued.That characterisation is strategically important. If the Court accepts that Classic was essentially a discontinuing save offer rather than a genuine alternative on equal commercial terms, Microsoft can argue it had no duty to put the plan beside its mainline Microsoft 365 offering in a mass email campaign.
There is a practical logic to Microsoft’s position. Retention offers are common across consumer subscriptions, from broadband to streaming services. Companies frequently offer discounts, legacy plans or tailored conditions only after a cancellation signal, and they do not normally advertise every retention concession upfront.
Yet the ACCC’s pleadings make the Classic offer harder to treat as a simple personalised discount. According to the regulator, the plan retained existing subscription features, excluded Copilot, and preserved the pre-October 2024 price. More importantly, it was allegedly available to the same population of existing auto-renewing subscribers receiving the price-change emails.
That makes the question less about whether a supplier may make a retention offer and more about whether this particular offer was materially relevant to the choice the customer was told they had. An option can be temporary and still matter. It can lack future AI features and still be the option a customer prefers—especially if that customer neither wants Copilot nor wishes to absorb a 29 percent or 45 percent annual increase.
Later Notices May Not Repair Earlier Messages
Microsoft also points to January 2025 communications that described ways for eligible existing subscribers to switch to plans without Copilot or AI credits, including Personal Classic and Family Classic for a limited time. Those later materials could be useful evidence that Microsoft eventually disclosed the plans more explicitly.The timeline is still awkward for the defence. The ACCC’s case centres on messages sent from October 31, 2024, including a first renewal notice delivered at least 30 days before the next renewal and a second notice around seven days before it. If a subscriber renewed at the higher price during that window, a later support page may not cure the alleged earlier omission.
This is a familiar problem in consumer-law disputes involving dark patterns: an accurate detail may exist somewhere in the customer journey without neutralising a misleading dominant message earlier in that journey. The ACCC has specifically elevated manipulative and false practices in digital markets, including subscription traps, among its 2026–27 enforcement priorities.
For IT administrators, the consumer case also carries a broader warning about communication design. Self-service portals and account-management flows can contain a technically available choice that is effectively invisible to customers making a decision from an email, storefront, renewal screen or procurement notice. A legal outcome against Microsoft would not mean every plan permutation must appear in every email. It could, however, raise the risk of presenting a deliberately simplified choice set when an undisclosed alternative is cheaper and directly responsive to the stated customer decision.
Microsoft Australia’s Role Is Also in Play
The defence reportedly challenges the ACCC’s attempt to hold Microsoft Australia jointly responsible with Microsoft Corporation. Microsoft characterises the U.S. parent as the entity that prepared the disputed communications and the Australian company as a reseller.That is not a side issue. Cross-border software services are commonly sold through local subsidiaries while product, billing, marketing and account-management systems are controlled elsewhere. The Court’s approach to responsibility could matter for other multinational platforms operating in Australia, particularly where Australian consumers contract locally but receive communications generated through global systems.
The substantive disclosure dispute remains the bigger issue, however. Microsoft must persuade the Court that Classic was different enough from the mainstream offering that withholding it from the original notices did not create a misleading impression.
A trial is expected in 2027, according to Maddocks. Until then, the case stands as an unusually clear test of whether “subscriptions change” can coexist with a duty to disclose a cheaper route that lets customers avoid the change.
References
- Primary source: Maddocks
Published: 2026-07-20T04:03:08.360268
Maddocks | Necessary Innovation or Hidden Choices? Microsoft's…
This case will have real consequences for how companies communicate product and pricing changes to Australian consumers.
www.maddocks.com.au
- Related coverage: accc.gov.au
Microsoft Word - Microsoft - Concise Statement (FINAL)(66852577.1).docx
PDF documentwww.accc.gov.au
- Related coverage: pursuit.unimelb.edu.au
What the ACCC’s case against Microsoft tells us about the hidden dangers of subscriptions | Pursuit by the University of Melbourne
The rise of unethical practices that exploit Australian consumers, through the rapidly growing subscription economy, highlights the need for up-to-date legal and regulatory frameworks, says a University of Melbourne expertpursuit.unimelb.edu.au
