Microsoft has issued a major apology and offered refunds to almost three million Australian customers following accusations it misled subscribers about the cost of accessing its artificial intelligence features.
The tech giant started emailing Microsoft 365 Personal and Family subscribers on Thursday, conceding its pricing was not transparent and it did not meet company standards. The move comes just 10 days after the Australian Competition and Consumer Commission launched federal court action against Microsoft Australia and its US parent company.
The ACCC is alleging Microsoft misled some 2.7 million subscribers into paying higher prices, it claims, by failing to adequately inform them of cheaper subscription options without the company’s AI assistant, Copilot. The customers, according to the ACCC, were only made aware of their option to choose the no-AI alternative when they tried to cancel their subscription altogether.
Microsoft Offers Millions in Refunds Over Unclear AI-Free Subscription Pricing
Microsoft has four different plans for subscribers at the moment. Two are $16 and $18 a month with Copilot included, while “classic” subscriptions come without the AI tool, costing $11 and $14 per month, respectively. The issue, according to the ACCC, is that existing customers weren’t adequately informed about cheaper alternatives like these once pricing changed.
Those subscribers who switch back to the lower-priced classic plans before the end of 2025 will get refunds covering all the payments made after 30 November 2024. This may cost Microsoft millions of dollars, though the company has not disclosed the expected total.
“Our relationship is based on trust and transparency, and we apologize for falling short of our standards,” Microsoft said in its email to customers.
The ACCC chair, Gina Cass-Gottlieb, raised serious concerns about Microsoft’s communication strategy, which she said denied customers the opportunity to make informed choices about their subscriptions.
“We’re concerned that Microsoft’s communications deprived its customers of the chance to make informed choices about their subscription options,” Ms. Cass-Gottlieb said.
It was another mistake, Microsoft has since acknowledged. In a statement, the company conceded that, in hindsight, it could have been clearer about making subscriptions that don’t rely on AI available to all customers, rather than to just those people threatening to cancel.
“We expressed our regret for not being clearer about our subscription options, shared details about lower priced alternatives that come without AI, and offered a refund to eligible subscribers who wish to switch,” the statement said.
Microsoft Accused of Deceptive AI Pricing Tactics by ACCC
The financial consequences for Microsoft go well beyond just customer refunds, though. Should the ACCC’s legal action succeed, then substantial penalties could also be imposed on Microsoft under Australian consumer law.
The maximum fines for corporations found guilty of anti-competitive practices are severe: a $50 million penalty, three times the value of the benefit derived from the misleading conduct, or 30% of the company’s adjusted turnover during the period of the breach.
The case puts a spotlight on growing scrutiny over how tech companies market and price their AI features as the tools become increasingly common in consumer products. Microsoft has been aggressively pushing its Copilot AI assistant across its product lineup, touting it in everything from Windows to Office applications.
The controversy centres on what the ACCC sees as a failure in transparency: rather than proactively informing all subscribers of their options when new AI-inclusive pricing was introduced, Microsoft apparently only revealed the cheaper alternatives to customers who were already in the process of canceling their accounts.
Millions of Australians Overpaid, Microsoft’s Pricing Under Fire
What this means, according to the commission, is that millions of Australians continued to pay higher prices without realizing that there was a choice. For many households and individuals, the difference between the AI-enabled and classic plans could add up to significant savings over time.
The case serves as a reminder that even the leading global technologies are not immune to consumer protection laws. Australian regulators have shown growing readiness to take major tech firms to task over practices they believe harm local consumers.
The fact that Microsoft quickly offered refunds and apologized suggests the company is taking the matter seriously, but it remains to be seen whether this will be enough to satisfy the ACCC or prevent the lawsuit from proceeding.
Whether Microsoft’s pricing practices actually breached Australian consumer law, and any ensuing penalties for the company, will be determined in federal court.
