Microsoft in Trouble in Australia: Watchdog Alleges AI Price Hikes

According to a statement from the ACCC, the regulator alleges that since October 31, 2024, Microsoft informed subscribers of its Microsoft 365 Personal and Family plans that they must either accept Copilot’s integration—along with a price rise—or cancel their subscription altogether. However, per the statement, a third option existed that was not disclosed to consumers: a “Classic” plan that retained all existing features without Copilot, at the original lower price.

The ACCC claims that Microsoft’s customer communications failed to mention the existence of the Classic plans, and users could only discover them by initiating the cancellation process. Subscribers had to navigate to their Microsoft account, begin cancelling their plan, and only then were they presented with the option to switch to the Classic plan.

“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,” ACCC Chair Gina Cass-Gottlieb said.

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According to the statement, the regulator argues that Microsoft’s actions prevented customers from making fully informed decisions about their subscription options. It believes that many subscribers would have chosen to stay with their original plans had they known they could continue without Copilot at a lower cost.

Following the introduction of Copilot, the annual subscription price for Microsoft 365 Personal reportedly increased by 45 percent—from $109 to $159—while the Family plan rose by 29 percent, from $139 to $179. The ACCC alleges that Microsoft sent two emails and published a blog post informing customers of the changes, all of which form key evidence in the case.

Per the ACCC’s statement, these communications were allegedly false or misleading, as they conveyed that consumers only had two choices: accept the more expensive Copilot-integrated plans or cancel their subscriptions entirely. The regulator maintains that such omissions breached Australian Consumer Law.

“All businesses need to provide accurate information about their services and prices. Failure to do so risks breaching the Australian Consumer Law,” Cass-Gottlieb added.

The ACCC also noted that consumer reports and discussions on online platforms such as Reddit played an important role in uncovering the issue. Information received through the ACCC’s Infocentre reportedly helped identify how customers discovered the hidden Classic plan while attempting to cancel their subscriptions.

Source: ACCC