Microsoft is being taken to court after it allegedly 'misled' 2.7 million customers over subscription prices.
The tech giant has found itself in legal trouble due to a lack of transparency about its subscription options. On Monday (27 October), the Australian Competition and Consumer Commission (ACCC) filed a lawsuit alleging that, starting in October 2024, Microsoft misled approximately 2.7 million customers.
According to the regulator, Microsoft suggested users had no choice but to upgrade to higher-priced Microsoft 365 personal and family plans that included Copilot, the company's artificial intelligence assistant. After Microsoft integrated Copilot into the standard plans, prices jumped dramatically.
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The Microsoft 365 personal plan increased by 45% to A$159 (about $103) annually, while the family plan rose by 29% to A$179 per year, the ACCC reported.
Microsoft reportedly failed to clearly tell users that a cheaper 'classic' plan without Copilot was still available. Customers only discovered this cheaper option existed after they started the cancellation process.
The watchdog argues this design breached Australian consumer law by failing to disclose material information and creating a false impression about what choices were actually available.
Microsoft contacted existing subscribers through two emails and a blog post to announce the Copilot integration and price increase that would apply at their next auto-renewal date.
“We allege that Microsoft’s two emails to existing subscribers and the blog post were false or misleading as they conveyed that consumers had to accept the more expensive Copilot-integrated plans, and that the only other option was to cancel,” ACCC Chair Gina Cass-Gottlieb explained. “All businesses need to provide accurate information about their services and prices. Failure to do so risks breaching the Australian Consumer Law.”
Australia's competition regulator has now sued Microsoft for pushing a design that forced people to choose the more expensive option.
“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,” Cass-Gottlieb added. “We believe many Microsoft 365 customers would have opted for the Classic plan had they been aware of all the available options.”
The regulator is pursuing several remedies from both Microsoft Australia Pty Ltd and its US parent company, Microsoft Corp, including financial penalties, consumer compensation, court injunctions and legal costs.
Under Australian consumer law, the maximum penalty for each breach is the greater of:
- A$50 million (about $32.5 million USD)
- Three times the benefits the company obtained from the misconduct, or
- 30% of the corporation's adjusted turnover during the breach period (if the value of benefits can't be determined).
Given that millions of customers were allegedly affected, the financial impact on the parent company of Xbox could be substantial.
The ACCC noted: "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 will not comment on what penalties the Court may impose."