Australia’s competition regulator has taken legal action against Microsoft, accusing the tech giant of misleading millions of users into paying higher prices for its Microsoft 365 software following the addition of its artificial intelligence assistant, Copilot.
The Australian Competition and Consumer Commission (ACCC) announced that it filed a lawsuit on Monday, alleging that Microsoft’s actions deceived around 2.7 million Australian customers. According to the regulator, from October 2024, Microsoft implied that subscribers needed to upgrade to higher-priced Microsoft 365 personal and family plans to access or continue using their services — plans that automatically came bundled with the new Copilot tool.
Significant Price Increases After AI Integration
The ACCC’s complaint outlines that the rollout of Copilot led to a 45% jump in the annual price of the Microsoft 365 Personal plan, raising it from A$109 to A$159 (about US$103). The Family plan, which covers multiple users, saw a 29% increase to A$179 per year.
However, the regulator said Microsoft failed to tell customers that they could still use a cheaper “classic” version of Microsoft 365 that did not include Copilot. Instead, many users were reportedly left believing that the price hikes were universal and that upgrading was their only option.
According to the ACCC, Microsoft’s failure to clearly present this cheaper alternative caused consumers to pay more unnecessarily — a move that may violate Australian consumer law.
Cheaper Option Hidden in Cancellation Menu
The lawsuit also alleges that Microsoft made it difficult for users to discover the availability of the less expensive plan. The ACCC said that customers only found out about the “classic” plan when they attempted to cancel their subscription.
By revealing the cheaper plan only at the cancellation stage, Microsoft’s design created a misleading impression that no other options existed, the watchdog argued. Such tactics, commonly referred to as “dark patterns”, are increasingly under regulatory scrutiny for manipulating consumer decisions.
The ACCC said this lack of transparency prevented users from making informed choices and unfairly nudged them toward higher-priced products.
Regulator Says Communications Were Incomplete
The ACCC also criticized Microsoft’s communication strategy surrounding the price change. The regulator noted that the company sent emails and published a blog post announcing Copilot’s arrival and the corresponding price increases but did not mention the continued existence of the cheaper classic plan.
Customers were only told that their subscriptions would renew at higher rates, with no clear option to opt out of the Copilot upgrade. The omission, according to the ACCC, amounted to misleading conduct by failing to disclose material information that would have influenced consumer decisions.
Microsoft Reviewing the Claims
In response, a Microsoft spokesperson confirmed that the company is reviewing the regulator’s claims in detail. The spokesperson declined to provide further comment while the case remains before the court.
The lawsuit will proceed in the Federal Court of Australia, where judges will determine whether Microsoft breached the Australian Consumer Law (ACL) and whether its subscription design and communication practices constituted deceptive conduct.
Potential Fines Could Reach Tens of Millions
The ACCC is seeking multiple remedies, including financial penalties, consumer refunds, and injunctions to prevent similar conduct in the future.
Under Australian law, the penalties for misleading or deceptive conduct can be severe. Companies may face fines of up to the greater of A$50 million, three times the benefit gained from the conduct, or 30% of their adjusted turnover during the period of violation if the benefit cannot be determined.
The regulator emphasized that the final decision on penalties will rest with the court and depend on its findings.
AI Pricing Under Global Scrutiny
The lawsuit comes amid growing global scrutiny of how major tech companies are introducing artificial intelligence features into existing products — often accompanied by steep price increases.
Microsoft’s Copilot, integrated across its suite of productivity tools such as Word, Excel, and Outlook, uses generative AI to automate tasks and enhance user efficiency. While the feature has been promoted as a productivity breakthrough, consumer advocates argue that companies must ensure transparency when linking new AI features to higher costs.
The ACCC’s move signals that regulators are paying close attention to how AI-driven pricing strategies affect consumers, especially when customers are not given a clear choice.
