Australia’s competition watchdog has accused Microsoft of misleading consumers into paying for its AI assistant Copilot. The Australian Competition and Consumer Commission (ACCC) filed a lawsuit in the Federal Court against Microsoft Australia and its parent company, Microsoft Corp. The lawsuit alleges that Microsoft made false or misleading statements to approximately 2.7 million Australian subscribers who have auto-renewal plans for Microsoft 365, which includes a suite of online Office services.
According to the ACCC, Microsoft told customers they had two options: pay extra for Microsoft 365 services integrated with Copilot or cancel their subscriptions altogether. However, a third option, which allowed subscribers to stick to their existing “Classic” plans without Copilot at the original price, was not clearly disclosed. This third option was only visible when customers started the cancellation process.
The ACCC chair, Gina Cass-Gottlieb, stated that Microsoft deliberately omitted reference to the Classic plans in its communications and concealed their existence to increase the number of consumers on more expensive Copilot-integrated plans. The commission noted that the Microsoft Office apps included in 365 subscriptions are essential for many people, and given the limited substitutes, cancelling the subscription is a decision many would not make lightly.
The alleged misleading behavior began on October 31, 2024, and affects subscribers on personal and family plans. The annual subscriptions for Microsoft 365 plans incorporating Copilot were between 29 and 45 percent higher than those without. The ACCC is seeking penalties, injunctions, consumer redress, and costs. Microsoft could face penalties of up to Aus$50 million (US$30 million) for each breach.
The lawsuit highlights the importance of transparency in consumer dealings, particularly in the technology sector. As the use of AI assistants becomes more widespread, regulators are increasingly scrutinizing the practices of tech companies to ensure they are fair and transparent. The outcome of this lawsuit will be closely watched, and any penalties imposed on Microsoft could have significant implications for the company and the broader tech industry.