Key Points
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Microsoft faces legal action in Australia for allegedly misleading 2.7 million Microsoft 365 users about subscription upgrades after the Copilot Integration.
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Copilot Integration caused price hikes of up to 45% for Microsoft 365 personal and family plans without clearly disclosing cheaper alternatives.
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Microsoft may face heavy penalties under Australian consumer law if found guilty of breaching fair trade practices.
Microsoft Faces Legal Scrutiny for Misleading Subscription Practices
Microsoft is under investigation by Australia’s competition authority for allegedly misleading millions of Microsoft 365 users into paying higher prices following the Copilot Integration. The Australian Competition and Consumer Commission (ACCC) has filed a lawsuit claiming that Microsoft’s communication strategy led consumers to believe they had to shift to more expensive plans bundled with the new AI assistant, Copilot.
According to the ACCC, from October 2024, the company’s actions affected approximately 2.7 million customers across Australia. Microsoft allegedly failed to make it clear that users could continue with the older, cheaper “classic” Microsoft 365 plans that did not include Copilot. Instead, the company reportedly gave the impression that the new Copilot-enhanced subscription was mandatory for continued service.
The case highlights growing regulatory scrutiny around tech giants introducing artificial intelligence tools into existing products. Microsoft, being a leader in AI-driven productivity software, has bundled its Copilot assistant across Microsoft 365 to enhance features like writing, summarising, and automating daily tasks. However, the regulator argues that this rollout came with insufficient transparency, leaving consumers unaware of cost-saving options.
Copilot Integration Leads to Significant Price Increases
The Copilot Integration brought with it a noticeable price jump in Microsoft’s flagship productivity plans. The ACCC report shows that after Copilot was added, the annual Microsoft 365 Personal plan increased by 45%, rising from A$109 to A$159, while the Family plan saw a 29% hike, reaching A$179 per year. These changes were automatically applied to many subscribers through auto-renewal mechanisms, often without clear upfront warnings about alternative options.
Emails and promotional materials from Microsoft only mentioned upcoming renewals and the new AI features, failing to explicitly highlight the availability of the cheaper “classic” plan. The regulator further claimed that this information appeared only at the end of the cancellation process — when users tried to discontinue their subscriptions — instead of being presented clearly in marketing or update emails.
According to consumer protection experts, this approach might have violated Australian Consumer Law, which requires companies to ensure transparency and fairness in all communication with users. For millions of households and small businesses relying on Microsoft 365, this meant unexpected expenses and confusion about what plan was truly necessary.
By integrating Copilot, Microsoft intended to boost the value of its services through advanced automation features like summarising documents, generating reports, and creating content using AI. However, from the regulatory standpoint, the Copilot Integration turned into a legal challenge, as the ACCC contends that users were pushed into paying more without informed consent.
Regulator Demands Accountability and Heavy Penalties
The Microsoft lawsuit filed by the Australian Competition and Consumer Commission seeks not only monetary penalties but also consumer compensation and corrective measures. The ACCC has requested that the court impose sanctions, mandate refunds where applicable, and order injunctions to prevent similar issues in the future.
Under Australian law, penalties for such consumer law breaches can be significant. The fine per violation can reach the greater of A$50 million, three times the benefit gained from the misconduct, or 30% of the company’s adjusted turnover if the financial gain cannot be calculated. This means Microsoft could face millions in potential penalties if found guilty.
The regulator also criticised Microsoft’s communication strategy, saying that it failed the standard of “clear, fair, and honest representation.” The ACCC’s Chairperson emphasised that consumers deserve full and upfront information about price changes and available alternatives, especially when products are bundled with expensive AI tools like Copilot.
While this is not the first time a major tech company has faced such scrutiny, it is one of the first lawsuits specifically targeting the Copilot Integration. The case could set an important precedent for how AI-enhanced subscriptions are marketed and priced globally. If the court sides with the ACCC, it may force Microsoft and other tech firms to adopt stricter transparency practices in the future.
Microsoft Responds and Reviews the Legal Claim
Microsoft, in response to the lawsuit, has stated that it is currently reviewing the Copilot Integration case and the ACCC’s claims. A spokesperson for the company mentioned that Microsoft values compliance with consumer protection laws and intends to cooperate with authorities during the legal proceedings.
Despite this, the company stopped short of commenting on whether it would offer refunds or lower prices in Australia. Instead, Microsoft reiterated that Copilot represents a significant leap forward in its mission to make AI accessible for productivity users worldwide. The company believes the feature provides genuine value for professionals and families alike by saving time and improving efficiency.
However, many consumer advocates argue that even if Copilot Integration improves functionality, the communication surrounding the price hike lacked clarity. Users should have had the freedom to make an informed decision, knowing both the advantages of upgrading and the availability of cheaper options.
Industry analysts believe that this lawsuit could have broader implications beyond Australia. As governments globally start examining the ethics and transparency of AI integrations, tech companies like Microsoft, Google, and Apple may need to adjust their subscription communication models. This could usher in a new wave of consumer protection regulations for AI-driven services worldwide.
