In October 2025 the ACCC filed a high-profile lawsuit against Microsoft, alleging that the tech giant misled approximately 2.7 million Australian consumers about the pricing of its Microsoft 365 Personal and Family subscription plans. The core of the complaint relates to Microsoft’s integration of its AI assistant “Copilot” into those plans, the resultant price increases, and the manner in which Microsoft communicated (or failed to communicate) the options available to consumers.
This case is significant not only for its size and the company involved, but also for what it may mean for AI-feature rollout, subscription services, consumer choice and transparency in the digital economy. What follows is a deep dive into the background, allegations, consumer impact, Microsoft’s response, and what this might mean for the broader industry.
Background: Microsoft 365 and the Copilot AI
Microsoft 365 is one of Microsoft’s major consumer subscription offerings. It bundles Office applications (such as Word, Excel, PowerPoint, Outlook) with collaboration tools (OneDrive, Teams) and cloud services, under “Personal” or “Family” plans for home / consumer use. On 31 October 2024 Microsoft integrated Copilot — its generative-AI assistant — into its Personal and Family subscription plans in Australia.
With this integration came material price hikes. For example, the annual cost of the Microsoft 365 Personal plan was raised from A$109 to A$159 (an increase of 45 %) and the Family plan was raised from A$139 to A$179 (an increase of 29 %).
At face value, Microsoft’s move may be seen as aligning with the wider tech-industry pattern: adding advanced AI features and charging accordingly. But the devil lies in how these changes were communicated and what choices were offered to consumers. The ACCC contends that Microsoft’s communications did not present all relevant options, particularly a “classic” plan without Copilot at the old price, thus depriving consumers of a fully informed choice.
What Does the ACCC Allege?
The ACCC’s case rests on several key allegations. First and foremost, the regulator claims that Microsoft misled consumers by failing to disclose a third option — namely, continuing with a “Classic” plan without Copilot at the previous price — and by presenting only two options when communicating with subscribers: either accept the Copilot-integrated plan (and pay the higher fee) or cancel the subscription.
In its initiating documents the ACCC alleges that Microsoft’s two emails to existing subscribers (and a blog post) conveyed the impression that the only way for consumers to maintain their existing service was to accept the AI integration and pay the higher renewal fee. The cheaper Classic alternative was not referenced in those communications.
According to ACCC Chair Gina Cass‑Gottlieb, the regulator will allege in court that Microsoft “deliberately omitted reference to the Classic plans … and concealed their existence until after subscribers initiated the cancellation process … to increase the number of consumers on more expensive Copilot-integrated plans”.
In short, the ACCC says consumers were essentially led to believe they had only the higher-priced upgrade or cancellation, when in fact another option existed — and that this nondisclosure made the “upgrade” path more likely. Because many consumers automatically renew their subscriptions and may not want to cancel critical software like Office, the regulator suggests the design of the communications and the account flows had the effect of steering them toward the higher cost option.
The Consumer Impact and Transparency Concerns
From a consumer perspective the allegations raise significant issues of choice, transparency, and fairness. Consider the impact on millions of households and subscribers who rely on Microsoft 365 for everyday productivity.
The price hikes themselves are material. An increase from A$109 to A$159 per year for a Personal plan means an extra A$50 annually per user; for a family plan the extra cost is similarly significant. For many households this is not trivial. More importantly, the alleged lack of clarity meant that many consumers may have accepted a higher fee without realizing they could keep their original plan at the previous price.
The ACCC argues that essential software such as Microsoft 365 is not easily substitutable. As the regulator noted: “The Office apps included in 365 subscriptions are essential in many people’s lives, and given there are limited substitutes… cancelling may not have been an option people would take lightly.”
By not clearly presenting the full array of options — especially the cheaper plan — Microsoft may have deprived consumers of a meaningful choice. The cancellation route (to access the Classic plan) is more cumbersome, and many consumers may have not navigated that far or been aware of it. That raises questions of transparency, informed consent, and whether the subscription design may amount to what regulators call “dark patterns” — design choices that nudge consumers toward more expensive options without their full awareness.
Moreover, the erosion of trust is an intangible yet crucial outcome. When consumers feel they were misled or not given clear choice, the long-term brand and customer relationship ramifications can be significant. For subscription services, where renewal inertia is often relied upon, clarity and fairness in communication are key.
How Did Microsoft Communicate With Subscribers?
According to the ACCC, Microsoft’s communications can be summarised as follows: the company sent two major emails to auto-renewing subscribers of Microsoft 365 Personal and Family plans advising them of the upcoming introduction of Copilot and the increased renewal price. In addition, Microsoft posted a blog entry outlining the increase in price and the change to the plan.
However, in all of these communications the option of retaining a “Classic” plan without Copilot and at the existing price was not clearly communicated. The ACCC’s documents include screenshots showing that the cheaper “Classic” plan only became visible to consumers when they began the cancellation workflow — selecting “Cancel subscription” in their Microsoft account, and proceeding through the steps. Only at that point was that option surfaced.
The regulator’s position is that by structuring the communications and the account-flow in this way Microsoft created a scenario where many consumers believed the only viable path was to accept the price increase or cancel — whereas the cheaper Classic plan was hidden and only accessible by going through a cancellation process. That design, the ACCC argues, deprived consumers of the ability to make an informed choice at renewal.
From Microsoft’s standpoint the company has responded by saying it is reviewing the claims in detail. A spokesperson emphasised that “consumer trust and transparency are top priorities for Microsoft,” and that the company is committed to working constructively with the regulator.
Legal Stakes and Potential Penalties
Under the Australian Consumer Law (ACL), companies found to engage in misleading or deceptive conduct, or to omit material information that would influence a consumer’s decision, can face substantial penalties. The ACCC’s court action seeks declarations that Microsoft’s conduct breached the ACL, injunctions to prevent future misconduct, orders for consumer redress (refunds/compensation) and coverage of legal costs.
The maximum civil penalty for each contravention is the greatest of: A$50 million; three times the benefit obtained (if able to be determined); or 30 % of the company’s adjusted turnover during the period of breach (if the benefit cannot be determined).
Because the customer base in question is large (2.7 million users in Australia), and the price increase significant, the potential financial exposure for Microsoft could be substantial. It’s worth stressing that any penalty ultimately will depend on the court’s findings, rather than being predetermined.
Microsoft’s Response and Industry Implications
Microsoft has stated publicly that it is reviewing the ACCC’s claims, and emphasises its commitment to transparency, consumer trust and compliance with legal standards. The company has not admitted wrongdoing at this stage and the case will proceed through the Federal Court.
Beyond the immediate parties, this case sends broader signals across the tech and subscription-software industries. First, it underscores that regulators are closely scrutinising how AI features are bundled into existing offerings, especially when pricing is increased and consumers’ choices may be limited or obfuscated.
Second, subscription-based businesses need to ensure that when they raise prices or add new features — particularly where those features are optional — they clearly communicate all options and ensure the customer experience enables an informed choice. If not, they risk regulatory, reputational and customer-relationship costs.
Third, this case may be a landmark for how AI integration in mainstream consumer software will be regulated. The fact that the ACCC is treating this as “very serious conduct” (in the words of its chair) suggests that future AI-feature rollouts may bear greater regulatory risk if not managed transparently.
Broader Context: AI’s Growing Role and Consumer Rights
The integration of AI assistants like Copilot into everyday software services is part of a major shift in how productivity tools work. These AI features promise enhanced value: automation, generative capabilities, improved insights and more. But they also raise important questions around pricing, user control, privacy, choice and fairness.
For consumers, when a subscription service introduces a major feature and raises price, they reasonably expect clear communication about what they are paying for, what the extra cost enables, and whether they have the option to decline that feature or stay on prior terms. If a cheaper alternative exists but is hidden, many would argue the consumer has not been fully informed.
The ACCC’s case therefore highlights the intersection of technology innovation and consumer protections. It brings into focus how choice architecture — how options are presented, how one flows through account settings, how alternatives are disclosed — impacts fairness. For regulators worldwide, this may become a reference point for how AI feature bundling should be handled.
In addition, given global subscription markets, what happens in Australia may influence other jurisdictions. Companies operating in many markets may need to anticipate similar scrutiny, and ensure they align their communications and offer architecture accordingly.
