Australia Sues Microsoft over ‘Misleading’ Price Hikes Linked to AI

The Australian Competition and Consumer Commission has filed a lawsuit against Microsoft, accusing the tech giant of misleading customers into paying higher prices for its Microsoft 365 software after bundling it with the AI tool Copilot.

Reuters reports that Australia’s competition regulator has taken legal action against Microsoft, alleging that the company misled approximately 2.7 million customers by suggesting they had to switch to more expensive Microsoft 365 personal and family plans that included the AI-powered Copilot tool. The lawsuit, filed by the Australian Competition and Consumer Commission (ACCC) on Monday, claims that Microsoft’s actions breached Australian consumer law.

According to the ACCC, Microsoft significantly increased the annual subscription prices of its Microsoft 365 plans after integrating the Copilot AI tool in October 2024. The personal plan saw a 45 percent price hike to A$159 ($103.32), while the family plan’s price rose by 29 percent to A$179 ($117.19). The regulator argues that Microsoft failed to clearly inform users that a cheaper “classic” plan without Copilot was still available.

The ACCC alleges that the option to retain the more affordable plan was only disclosed to consumers after they initiated the cancellation process. This design, the watchdog contends, breached Australian consumer law by failing to provide material information and creating a false impression of the available choices. Furthermore, the ACCC claims that Microsoft’s previous communications through emails and a blog post neglected to mention the cheaper alternative, only informing customers that the price increase would take effect at the next auto-renewal.

As a result of these allegations, the ACCC is seeking penalties, consumer redress, injunctions, and costs from both Microsoft Australia Pty Ltd and its U.S. parent company. The regulator clarified that the maximum penalty that could be imposed on a company for each violation of Australian consumer law is the greater of A$50 million, three times the benefits obtained that were reasonably attributable, or 30 percent of the corporation’s adjusted turnover during the breach period if the value of the benefits cannot be determined. However, the actual penalties will be determined by the Court based on its findings.

In response to the lawsuit, a Microsoft spokesperson stated that the company is reviewing the ACCC’s claim in detail. The tech giant has not provided any further comments on the matter at this time.