Microsoft Faces ACCC Lawsuit Over Alleged 365 Subscription Deception

Microsoft in Court for Allegedly Misleading Millions of Australians

The Australian Competition and Consumer Commission (ACCC) has launched Federal Court proceedings against Microsoft Australia and its parent company Microsoft Corporation, alleging the tech giant misled approximately 2.7 million Australian customers about Microsoft 365 subscription options and price increases following the integration of its AI assistant, Copilot.

Alleged Deceptive Practices

According to the ACCC, since October 31, 2024, Microsoft told subscribers of Microsoft 365 Personal and Family plans with auto-renewal enabled that to maintain their subscription they must either accept the integration of Copilot and pay higher prices, or cancel their subscription entirely. The regulator alleges this information was false or misleading because there was an undisclosed third option - the Microsoft 365 Personal or Family Classic plans - which allowed subscribers to retain all features of their existing plan without Copilot at the previous lower price.

'Following a detailed investigation, we will allege in Court that Microsoft deliberately omitted reference to the Classic plans in its communications and concealed their existence until after subscribers initiated the cancellation process to increase the number of consumers on more expensive Copilot-integrated plans,' ACCC Chair Gina Cass-Gottlieb stated.

Significant Price Increases

The price increases were substantial - the annual subscription price for Microsoft 365 Personal plan increased by 45% from $109 to $159, while the Family plan increased by 29% from $139 to $179. Microsoft communicated these changes through two emails and a blog post to auto-renewing subscribers, which the ACCC alleges were misleading because they failed to mention the Classic plan alternative.

'We're concerned that Microsoft's communications denied its customers the opportunity to make informed decisions about their subscription options, which included the possibility of retaining all the features of their existing plan without Copilot and at the lower price,' Ms Cass-Gottlieb emphasized.

Hidden Option Revealed Only During Cancellation

The Classic plans were only revealed to subscribers who began the cancellation process. Customers had to navigate to the subscriptions section of their Microsoft account, select 'Cancel subscription,' and only on the following page were they given the option to move to the Classic plan instead. This meant millions of customers were unaware of the cheaper alternative unless they actively tried to cancel their subscription.

Consumer Impact and Legal Consequences

The ACCC believes affected consumers suffered economic harm through automatic renewals at higher prices. The regulator is seeking orders including penalties, injunctions, declarations, consumer redress, and costs. Under Australian Consumer Law, Microsoft could face maximum penalties of the greater of $50 million, three times the total benefits obtained, or 30% of the corporation's adjusted turnover during the breach period.

Microsoft 365, formerly known as Office 365, is Microsoft's subscription-based productivity suite that includes applications like Word, Excel, PowerPoint, and cloud services through OneDrive. The integration of Copilot, Microsoft's generative AI assistant, began rolling out worldwide in January 2025 with varying price increases across different jurisdictions.

The case highlights growing regulatory scrutiny of tech companies' pricing practices, particularly as they integrate AI capabilities into existing services. Digital economy issues remain a current ACCC compliance and enforcement priority.