ACCC takes Microsoft to court over alleged misleading conduct

The Australian Competition and Consumer Commission (ACCC) has commenced proceedings in the Federal Court against Microsoft Australia and its US parent company, Microsoft Corporation, alleging they misled about 2.7 million Australian customers when communicating subscription changes to Microsoft 365 Personal and Family plans.

The ACCC claims that from 31 October 2024, Microsoft told subscribers with auto-renewal enabled that to continue their Microsoft 365 plan, they needed to accept the new AI-integrated version with Copilot at a higher price, or cancel their subscription altogether.

According to the ACCC, Microsoft failed to disclose a third option, the “Classic” plan, which retained existing features without Copilot at the previous, lower price. Subscribers reportedly only encountered this option after initiating the cancellation process through their Microsoft account.

“We will allege in Court that 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 Gina Cass-Gottlieb, Chair of the ACCC. “We’re concerned that Microsoft’s communications denied its customers the opportunity to make informed decisions about their subscription options.”

Following the integration of Copilot, the annual subscription price of Microsoft 365 Personal increased by 45 per cent, from $109 to $159, while the Family plan rose by 29 per cent, from $139 to $179.

The ACCC alleges that Microsoft’s two emails and a blog post to subscribers were false or misleading as they implied that consumers had no alternative but to accept the higher-priced Copilot plan or cancel entirely.

The regulator is seeking penalties, injunctions, declarations, consumer redress, and costs. Any penalties will be determined by the Court if the alleged breaches of the Australian Consumer Law are proven.

Consumers affected by the alleged conduct may have paid higher renewal fees as a result of the automatic switch. The ACCC advises current Microsoft 365 subscribers who haven’t yet renewed to check whether the Classic plan remains available through their account settings.

The ACCC’s full statement can be read here.

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