Microsoft has announced it will refund customers following allegations from the Australian Competition and Consumer Commission (ACCC) that the company misled approximately 2.7 million Australians regarding subscription costs. The ACCC claims Microsoft encouraged customers to remain on more expensive plans by failing to disclose a lower-cost option.

In a letter sent to affected customers, Microsoft expressed regret for its communication regarding price changes that took effect in October 2024. The company acknowledged it "fell short of our standards" and admitted it could have been clearer about the subscription options available.

The ACCC initiated legal proceedings against Microsoft last week, asserting that the company misrepresented the terms of its Microsoft 365 subscriptions, which include popular software like Word, Excel, and PowerPoint. According to the ACCC, since October 31, 2024, Microsoft informed subscribers of its 365 Personal and Family plans that they had to accept the integration of its new AI tool, Copilot, and pay higher prices to maintain their subscriptions. Alternatively, they could cancel their subscriptions.

However, the ACCC alleges that there was a third option—the Microsoft 365 Personal or Family Classic plans—which allowed subscribers to keep their existing features without the AI integration at a lower price. The consumer watchdog stated that Microsoft did not mention these Classic plans in its communications, and the only way for subscribers to discover them was to initiate the cancellation process.

The ACCC reported that the annual subscription price for the Microsoft 365 Personal plan increased by 45%, from $109 to $159, while the Family plan saw a 29% increase, from $139 to $179.

In its recent communication, Microsoft stated, "In hindsight, we could have been clearer about the availability of a non-AI-enabled offering with subscribers, not just to those who opted to cancel their subscription." The company also provided details about the lower-priced alternatives and offered refunds to eligible subscribers who wish to switch.

Microsoft acknowledged that the situation did not meet its standards and committed to learning from the experience. The ACCC is seeking penalties and consumer redress orders against Microsoft, with potential fines reaching up to $50 million or three times the benefits gained from the alleged breach. The maximum penalty could also be 30% of the corporation's adjusted turnover during the breach period.