Australia’s competition regulator, the Australian Competition and Consumer Commission, filed a lawsuit in the Federal Court against Microsoft on Monday. The action alleges that the company misled 2.7 million customers regarding pricing options following the integration of its Copilot AI assistant into Microsoft 365 subscriptions. This occurred in Australia to address claims of deceptive practices that concealed cheaper plans.

The lawsuit centers on accusations that Microsoft engaged in misleading conduct during subscription renewals. The company informed subscribers of only two choices: accept the Copilot integration along with substantial price increases or cancel their service completely. According to the ACCC, Microsoft omitted any mention of a third option, which consisted of “Classic” plans. These plans preserved existing features without the AI integration and retained the previous pricing levels.

ACCC Chair Gina Cass-Gottlieb stated, “Following a detailed investigation, we 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.” This investigation led to the legal proceedings, highlighting specific tactics used to steer customers toward higher-cost subscriptions.

The price adjustments implemented by Microsoft were notable in magnitude. For Microsoft 365 Personal subscriptions, the annual cost increased by 45 percent, rising from A$109 to A$159. Similarly, Family plans saw a 29 percent hike, moving from A$139 to A$179 per year. These changes applied to auto-renewing customers who received notifications about the updates.

Customers seeking the lower-priced Classic plans encountered a specific process to discover them. The alternative became available only after they began the cancellation procedure. This revelation occurred subsequent to selecting the “Cancel subscription” option within the account settings, effectively burying the choice until that point in the interaction.

The ACCC’s allegations target Microsoft’s communication efforts that commenced on 31 October 2024. On that date, the company started informing auto-renewing subscribers about the Copilot integration and the associated price rises. Court documents detail that Microsoft distributed two emails and released a blog post during this period. The regulator describes these materials as false or misleading because they implied that subscribers must accept the more expensive Copilot-integrated plans without presenting other viable alternatives.

In pursuing the case, the ACCC requests a range of remedies from the court. These include penalties, consumer redress to compensate affected individuals, injunctions to prevent future similar conduct, and coverage of legal costs. The targets are both Microsoft Australia and its U.S.-based parent corporation. Under the Australian Consumer Law, the maximum penalties for such breaches can amount to A$50 million, or three times the benefits derived from the conduct, or 30 percent of the corporation’s adjusted turnover for the period of the breach, whichever is the greatest.

Microsoft has not issued any response to the allegations at this stage. The company did not immediately reply to a request for comment from Reuters.

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