Australia Targets Microsoft in Lawsuit Over AI-Related 365 Price Rises

The Australian Competition and Consumer Commission (ACCC) has taken Microsoft to court, accusing the tech giant of misleading about 2.7 million Australian consumers over changes to its Microsoft 365 subscriptions.

The case, lodged in the Federal Court against both Microsoft Australia and its US parent company, centres on claims that Microsoft misrepresented its pricing and renewal options when integrating its artificial intelligence assistant, Copilot, into its suite of subscription products.

According to the ACCC, Microsoft told users they would need to pay higher prices to maintain their Microsoft 365 plans with Copilot or cancel their subscriptions entirely. However, the regulator alleges Microsoft failed to disclose that customers could instead retain their existing “classic” plans — without Copilot — at the old, lower price.

ACCC chair Gina Cass-Gottlieb said the conduct appeared deliberate, and adding that the regulator would seek a significant penalty to deter similar behaviour in the future.

A realistic choice

The commission’s investigation found that subscribers only discovered the cheaper “classic” option if they began the process of cancelling their subscription. This design, the ACCC argues, effectively pushed users into accepting more expensive AI-integrated plans.

Cass-Gottlieb said the regulator was particularly concerned that many Australians rely heavily on Microsoft’s Office apps, meaning that cancelling entirely would not have been a realistic choice. “We believe many Microsoft 365 customers would have opted for the classic plan had they been aware of all the available options,” she said.

Consumer advocates have backed the ACCC’s move, arguing that Microsoft’s vast market share gives its actions wide-reaching impact.

Stephanie Tonkin from the Consumer Action Law Centre said “high numbers of Australians have arguably been misled into purchasing a more expensive subscription package than they may have wanted or needed.” The Consumer Policy Research Centre added that businesses “should be held accountable for prioritising tactics over trust.”

Implications of the case

The potential implications of this case extend well beyond Microsoft. If successful, it could establish stronger precedents for how large subscription-based digital companies must communicate changes in pricing and product bundles to consumers. Regulators around the world have been tightening scrutiny on subscription models — often called “dark patterns” — that make it difficult for users to downgrade or cancel.

Microsoft, for its part, said it was reviewing the claims in detail. “Consumer trust and transparency are top priorities for Microsoft,” a company spokesperson said. “We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”

The alleged misconduct has already frustrated long-term customers. Wakefield Planning director Angus Witherby, a Microsoft user since 1992, told ABC News that he discovered the price rise only after noticing a larger automatic deduction. “On querying that I was told it was a unilateral variation in pricing,” he said. Witherby, who complained of poor technical support and communication, added that he wanted Microsoft to refund the difference, not just issue credit.

The ACCC claims Microsoft’s actions may have caused “economic harm” to millions of Australians through automatic renewals at inflated prices. Prices for Microsoft 365’s personal plan rose by 45 per cent, from $109 to $159 per year, while the family plan jumped 29 per cent, from $139 to $179. The watchdog is seeking penalties, injunctions, declarations, and consumer redress.

Cass-Gottlieb made clear that the regulator’s issue is not with Microsoft’s right to innovate or change prices, but with the way it communicated those changes. “The ACCC does not take issue with the offering of new services, or a different plan, or, actually, an increase in price,” she said. “We have taken these proceedings today because we allege millions of Australian consumers were deprived of the opportunity to make an informed choice about the subscription options available to them.”

The case highlights broader tensions in the technology sector, where companies are increasingly embedding AI features into existing products and raising prices accordingly. For many consumers, however, these new tools may not provide tangible value — especially if introduced without clear consent or alternatives.

As the Federal Court considers the ACCC’s allegations, the outcome could reshape expectations for transparency in the subscription economy, influencing not only Microsoft’s operations but the practices of global digital service providers across Australia.

Microsoft has officially rolled out its Copilot Fall Release, marking what the company calls a “big step forward in making AI more personal, useful, and human-centered.”

This article was reviewed by Antony Peyton.