Key Points:
- Australia’s consumer watchdog, the ACCC, has sued Microsoft, alleging the tech giant misled approximately 2.7 million customers into purchasing more expensive Microsoft 365 plans bundled with Copilot AI
- The price increases for personal and family plans, following the integration of Copilot, were up to 45%, with a lower-cost, non-AI “Classic” plan allegedly hidden from consumers
- The regulator claims customers were only made aware of the cheaper alternative after they initiated the cancellation process, a tactic described by critics as a ‘dark pattern’
The integration of Artificial Intelligence into everyday software has been hailed as a monumental technological leap. Yet, this narrative is facing a severe challenge as Microsoft, one of the world’s largest software companies, now stands accused of leveraging this transition to mislead millions of its customers.
The controversy centres on the bundling of its AI assistant, Copilot, into Microsoft 365 personal and family subscription plans, and the subsequent price hikes.
ACCC Takes Legal Action
The allegations surfaced after the Australian Competition and Consumer Commission (ACCC), the nation’s consumer watchdog, took legal action against Microsoft Australia and its U.S. parent company, Microsoft Corp.
The ACCC has filed a suit in the Federal Court, alleging that Microsoft engaged in false or misleading conduct involving approximately 2.7 million Australians who subscribe to Microsoft 365 via auto-renewal. The regulator’s claims stem from communications sent to subscribers regarding the integration of Copilot.
Concealing the ‘Classic’ Option
According to the ACCC, Microsoft’s communications, which included two emails and a blog post, informed auto-renewing customers that their existing subscriptions would see significant price increases due to the inclusion of Copilot AI. The annual price of the Microsoft 365 Personal plan, for instance, reportedly rose by 45%, while the Family plan increased by 29%.
The regulator alleges that these communications presented customers with only two options: accept the higher price for the Copilot-integrated plan or cancel their subscription entirely. Critically, the ACCC asserts that a third, less-expensive option, a “Classic” version of Microsoft 365 without Copilot, was available, but its existence was deliberately concealed.
The ‘Dark Pattern’ of Cancellation
The core of the ACCC’s complaint is that subscribers were only informed of the cheaper “Classic” plan after they had initiated the cancellation process. This tactic has been widely criticized by consumer advocates and technology commentators as a “dark pattern”, a user interface design intentionally crafted to steer consumers towards a more expensive choice by making alternatives cumbersome or difficult to find.
ACCC Chair Gina Cass-Gottlieb stated that the commission “will allege in court that 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,” as reported by The Guardian.
Given that the Office apps included in 365 subscriptions are “essential in many people’s lives” and have “limited substitutes,” cancelling may not have been a viable option for many customers.
The Financial and Reputational Stakes
The legal challenge represents one of the first major regulatory tests globally concerning the integration and monetization of consumer-facing AI services. The ACCC is seeking significant penalties, consumer redress, injunctions, and legal costs.
Under Australian consumer law, companies found guilty of misleading conduct face maximum fines potentially reaching the greater of A$50 million, three times the benefit obtained, or 30% of adjusted turnover during the breach period.
The controversy highlights a growing friction between corporate desires to monetize costly AI development and the principle of consumer transparency. Many users, as noted in online forums reported by outlets like Mint and Tiedata Limited, felt they were being compelled to adopt a feature they didn’t want or need, with no clear way to opt out of the cost increase.
Microsoft’s Response and Broader Implications
In response to the lawsuit, a Microsoft spokesperson stated that “Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC’s claim in detail,” and that the company remains “committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”
