Microsoft (NASDAQ:MSFT) is facing legal action from Australia’s consumer regulator, which claims the company misled millions of customers by making it difficult to avoid paying for its new artificial intelligence add-on.
The Australian Competition and Consumer Commission (ACCC) filed a lawsuit in Federal Court on Monday, alleging that Microsoft failed to clearly inform approximately 2.7 million Microsoft 365 subscribers about how to opt out of paying for its Copilot AI tools when their plans renewed.
According to the ACCC, Microsoft informed customers over the past year that subscription prices would increase to include Copilot. Although the company’s messages said users could cancel their plans, the regulator claims Microsoft only disclosed another option — declining Copilot to avoid the extra cost while keeping their existing plan — after customers had already started the cancellation process.
The regulator argues that this lack of transparency breaches Australian consumer law. The ACCC is seeking penalties and customer refunds, noting that companies can be fined up to 50 million Australian dollars (US$32.6 million) per violation.
“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,” said ACCC Chair Gina Cass-Gottlieb.
She added that many customers would have been reluctant to cancel their subscriptions, since the productivity tools included in Microsoft 365 are considered essential by both households and businesses.
The ACCC said the annual cost of a Microsoft 365 Personal plan rose by 45% to A$159 following the addition of Copilot, while the family plan increased by 29% to A$179.
In response, Microsoft said it is assessing the allegations and emphasized: “Consumer trust and transparency are top priorities for Microsoft. We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”