Australia’s consumer watchdog is suing Microsoft for allegedly engaging in "misleading or deceptive conduct" over how it communicated price increases and subscription options for its Microsoft 365 software suite, affecting around 2.7 million local customers.

The Australian Competition and Consumer Commission (ACCC) launched proceedings against Microsoft in the Federal Court on Monday and alleged the technology giant had given “false or misleading representations” to subscribers after it added its AI assistant Copilot to its 365 software in the Australian market.

“The ACCC alleges that since 31 October 2024, Microsoft has told subscribers of Microsoft 365 Personal and Family plans with auto-renewal enabled that to maintain their subscription they must accept the integration of Copilot and pay higher prices for their plan, or, alternatively, cancel their subscription,” the ACCC said.

The consumer watchdog alleged Microsoft did not tell consumers about “an undisclosed third option” of so-called Classic plans, which allowed customers to keep the features and price of their existing plan, without AI features such as Copilot.

The issue came to a head last Summer when Australian users criticised the Microsoft 365 price hikes and informed each other about how to access Classic plans which were not immediately visible.

This involved attempting to cancel a Microsoft 365 subscription, which caused the company’s website to offer the option of reverting to a Classic plan.

“Penalties, injunctions, declarations, consumer redress, and costs” would be sought from Microsoft, the ACCC said.

Microsoft was "reviewing the ACCC's claim in detail" and saw consumer trust and tranparency as "top priorities", a spokesperson said in a statement to Information Age on Monday.

“We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards," they said.

While any penalty against Microsoft would be determined by the court, corporations can face a maximum fine of $50 million for each breach of Australian Consumer Law, or three times the total benefit gained by the offending conduct.


The ACCC alleges Microsoft 365 users were only offered a 'Classic' plan (seen above) after attempting to cancel their subscriptions. Image: ACCC / Supplied

Microsoft ‘deliberately omitted’ Classic plans, ACCC says

ACCC Chair Gina Cass-Gottlieb said the regulator would 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”.

Cass-Gottlieb argued cancelling a Microsoft 365 subscription was “a decision many would not make lightly”, given the subscription included popular Microsoft Office apps such as Word, PowerPoint, Excel, and Outlook, which were “essential in many people’s lives”.

“We’re concerned that Microsoft’s communications denied its customers the opportunity to make informed decisions about their subscription options, which included the possibility of retaining all the features of their existing plan without Copilot and at the lower price,” she said.

“We believe many Microsoft 365 customers would have opted for the Classic plan had they been aware of all the available options.”

Microsoft emails, deleted blog post central to ACCC case

Microsoft increased Microsoft 365 prices in Australia following the local introduction of Copilot and its Designer image generator in October 2024, when the cost of a personal licence rose 45 per cent from $109 per year to $159 per year and a family subscription rose about 30 per cent from $139 per year to $179 per year.

Microsoft defended the price increases when contacted by Information Age in January, following user backlash.

Two emails and a since-deleted blog post in which Microsoft told customers about the price increases and the introduction of Copilot “were false and misleading” and would be central to the ACCC’s court case, the regulator said.

It alleged the correspondence falsely “conveyed that consumers had to accept the more expensive Copilot-integrated plans, and that the only other option was to cancel”.

“All businesses need to provide accurate information about their services and prices," Cass-Gottlieb said.

"Failure to do so risks breaching the Australian Consumer Law."

The ACCC’s investigation into Microsoft’s practices involved reviewing commentary from Australian consumers on online forums such as Reddit, the agency said.

Microsoft’s raising of Microsoft 365 prices in Australia was part of market testing which also included New Zealand, Singapore, Malaysia, Taiwan, and Thailand.

The price changes did not affect Microsoft’s business or enterprise customers, so the ACCC said its case would not involve such organisations.