The Australian Competition and Consumer Commission (ACCC) has initiated legal action against Microsoft, alleging the company misled approximately 2.7 million Australian users regarding Microsoft 365 subscription options and price increases. The lawsuit was filed in the Federal Court, targeting both Microsoft Australia and its parent company, Microsoft Corporation.

The ACCC claims that since October 2024, Microsoft has communicated misleading information to subscribers of its Microsoft 365 Personal and Family plans with auto-renewal features. According to the regulator, Microsoft informed these customers that they must either accept the integration of its AI assistant, Copilot, which comes with a price increase, or cancel their subscription entirely. However, the ACCC argues that Microsoft failed to disclose a third option: the ability to retain their existing plans at the previous lower prices without Copilot.

Gina Cass-Gottlieb, Chair of the ACCC, stated, "Following a detailed investigation, we will allege in Court that Microsoft deliberately omitted reference to the Classic plans and concealed their existence until after subscribers initiated the cancellation process." She expressed concern that Microsoft’s actions denied customers the chance to make informed decisions about their subscriptions.

The price hikes for Microsoft 365 subscriptions were significant. The annual cost for the Personal plan rose by 45%, from $109 to $159, while the Family plan increased by 29%, from $139 to $179. Many consumers were reportedly unaware of the Classic option and were automatically renewed at the higher rates.

The ACCC's investigation was prompted by numerous complaints from users, particularly on online forums, where many criticized the lack of clarity regarding the subscription changes. One user remarked, "The arrogance of Microsoft is astounding," highlighting the frustration felt by many customers who believed they had no choice but to accept the new terms.

The lawsuit also notes that the issue has gained attention beyond Australia. In the UK, the Science, Innovation and Technology Committee has questioned Microsoft about the price increases and the opt-out process for Copilot.

The ACCC is seeking various remedies, including penalties, injunctions, declarations, consumer redress, and costs. Under Australian Consumer Law, corporations can face fines of up to $50 million per breach or 30% of adjusted turnover if the benefit gained cannot be quantified. This case specifically pertains to Microsoft 365 Personal and Family plans for home users, excluding business or enterprise customers.

Microsoft has not yet publicly commented on the ACCC's allegations but has stated that consumer trust and transparency are priorities for the company. A spokesperson mentioned, "We are reviewing the ACCC’s claim in detail. We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards."