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The competition regulator in Australia has taken Microsoft to court, accusing the company of deceiving millions of customers by charging higher subscription fees for its Microsoft 365 software after integrating its artificial intelligence tool, Copilot.
The Australian Competition and Consumer Commission (ACCC) claims that from October 2024, Microsoft misled about 2.7 million users into thinking they had to upgrade to more expensive Microsoft 365 personal and family plans that included Copilot.
Prices for the personal plan jumped 45% to A$159 annually, while the family plan increased 29% to A$179.
According to the ACCC, Microsoft failed to clearly inform customers that a cheaper “classic” version of Microsoft 365, without Copilot, remained available. The regulator said that users only discovered this lower-priced option after starting the cancellation process, a design choice it believes violated Australian consumer law.
“Microsoft’s conduct created the impression that customers had no choice but to pay more if they wished to continue using Microsoft 365,” the ACCC alleged. The watchdog said the company’s emails and blog posts also omitted any mention of the cheaper plan, instead informing users that the higher price would automatically apply at renewal.
The ACCC accuses Microsoft of breaching sections 18 and 29 of the Australian Consumer Law, which prohibit misleading or deceptive conduct and false or misleading representations about goods and services. It argues that Microsoft’s approach amounted to “dark patterns,” design tactics that subtly manipulate user behaviour to achieve commercial gain.
In response, a Microsoft spokesperson said the company was “reviewing the ACCC’s claim in detail.” The tech firm has not indicated whether it plans to alter its subscription messaging or reinstate clearer disclosures for customers.
If found guilty, Microsoft could face financial penalties. Under Australian law, the maximum penalty per breach is the greater of A$50 million, three times the benefit gained, or 30% of the company’s adjusted turnover during the period of violation if the benefit cannot be determined.
“Any penalty that might apply to this conduct is a matter for the Court to determine and would depend on the Court’s findings,” the ACCC stated. “The ACCC will not comment on what penalties the Court may impose.”
The regulator is also seeking consumer redress, injunctions, and legal costs against both Microsoft Australia Pty Ltd and its U.S. parent, Microsoft Corp.
The way technology companies bundle AI tools into existing products and communicate subscription choices is currently being investigated, with similar efforts underway in the European Union under the Digital Services Act and Digital Markets Act, while the U.S. Federal Trade Commission is examining subscription “traps” and AI-related disclosures.
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