Microsoft faces lawsuit in Australia for allegedly misleading users into pricier AI-powered 365 plans

Microsoft

The Australian Competition and Consumer Commission (ACCC) has filed a lawsuit against Microsoft, accusing the company of deceiving millions of users into upgrading to more expensive Microsoft 365 plans following the introduction of its AI assistant, Copilot. The regulator claims the move misled customers into believing they had no choice but to switch to higher-tier subscriptions to continue using the service.

According to the ACCC, starting in October 2024, Microsoft misled roughly 2.7 million Australian customers by suggesting that Copilot was now part of the only available Microsoft 365 Personal and Family plans. Prices jumped significantly — the Personal plan rose by 45% to A$159 (around $103), and the Family plan by 29% to A$179 (roughly $117).

The watchdog alleges that Microsoft failed to make clear that users could still continue with a cheaper “classic” version of Microsoft 365 that did not include Copilot. Many consumers reportedly only discovered this lower-cost option when attempting to cancel their subscriptions, a practice the ACCC says created a false impression and breached Australian consumer law.

The ACCC is seeking penalties, refunds, and injunctions against both Microsoft Australia and its US parent company, Microsoft Corp. Under Australian law, penalties for misleading or deceptive conduct can reach the greater of A$50 million, three times the benefit obtained, or 30% of turnover during the breach period if the exact benefit cannot be determined.

The regulator’s chair stated that omitting clear information about available choices unfairly pressured consumers into paying more. The ACCC will also pursue compensation for affected subscribers.

Reports first surfaced in February 2025, when Australian customers complained about Microsoft’s sudden price increases. Many vented their frustration on online forums after learning that the price jumps were tied to the integration of the Copilot AI assistant.

Microsoft had notified customers about these changes through two email updates and a blog post sent to auto-renewing subscribers around 31 October 2024. The ACCC says these communications are now central to its legal case.

As of now, Microsoft has not released an official statement regarding the lawsuit. The case marks one of the first major regulatory challenges in Australia involving the integration of AI features into mainstream subscription software.