Australia’s consumer watchdog has launched legal action against Microsoft, accusing the tech giant of misleading about 2.7 million Australians into paying more for Microsoft 365 subscriptions bundled with its new AI assistant, Copilot.
The Australian Competition and Consumer Commission (ACCC) alleges that Microsoft’s communication led subscribers to believe they had no choice but to move to higher-priced plans that included Copilot or cancel their service — when a cheaper “Classic” of Microsoft 365 without AI features was still available.
Hidden Option Behind The Cancel Button
According to the ACCC, Microsoft rolled out the Copilot upgrade with AI features like drafting text and summarizing emails to Australian users on October 31, 2024. The move came with sharp price hikes: 45% for the Personal plan (from A$109 to A$159) and 29% for the Family plan (from A$139 to A$179).
The watchdog alleges that Microsoft sent two emails and published a blog post announcing the changes, but failed to mention a cheaper “Classic” version that kept all original features without Copilot. It also failed to inform that users could keep their old plan at the original price — but only if they began the cancellation process, the ACCC added.
The cheaper “Classic” plan appeared only after users clicked Cancel Subscription and went several steps into the process — a design choice the ACCC calls misleading and deceptive.
“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 said.
“We believe many Microsoft 365 customers would have opted for the Classic plan had they been aware of all the available options.”
The regulator argues that the omission misled consumers and breached multiple sections of Australian Consumer Law, designed to stop companies from making false or misleading claims about prices or what products people need.
Legal Penalties And Next Steps
The regulator has filed a lawsuit in the Federal Court of Australia in New South Wales against both Microsoft Australia and its U.S. parent company, seeking orders including penalties, injunctions, declarations, consumer redress, and costs for the company’s breached Australian Consumer Law.
Under that law, a company found guilty of misleading conduct can face fines of up to A$50 million per breach, or three times the total benefits that have been obtained by the company and are reasonably attributable, or 30 percent of its adjusted turnover during the breach turnover period, whichever is greater.
Microsoft Responds
A Microsoft spokesperson said the company is reviewing the ACCC’s claims, adding, “Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC’s claim in detail. We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”
Consumer Backlash
Consumer advocates have praised the ACCC’s move, saying it highlights growing concerns around AI-linked subscription pricing. For months, Australian users have voiced frustration over unexplained subscription increases, with many only discovering the cheaper “Classic” plan after comparing notes on online forums such as Reddit.
“This is exactly the kind of case we expect our regulator to pursue,” said Stephanie Tonkin, CEO of the Consumer Action Law Centre. “Many Australians may have paid more than they needed to because the cheaper option was buried.”
For now, Australian users who haven’t renewed their subscriptions since July 8, 2025, can reportedly still access the Classic plan by starting the cancellation process — though the ACCC warns Microsoft could change those options at any time.
