Microsoft accused of misleading 2.7 million customers to pay more for Copilot with 365 plan renewals

Microsoft Australia is accused of misleading 2.7 million customers and duping them into paying more for subscriptions after it integrated its artificial intelligence assistant Copilot into Microsoft 365 plans, according to Federal Court action launched today by the consumer watchdog.

The Australian Competition and Consumer Commission (ACCC) is alleging that, since 31 October last year, subscribers of Microsoft 365 personal and family plans on auto-renewal notices were told they must accept the integration of Copilot and pay higher prices for their plan or cancel their subscription.

The annual subscription for the Microsoft 365 Personal plan increased by 45 per cent from $109 to $159, while the Family plan rose by 29 per cent from $139 to $179.

However, the ACCC alleges the information provided to subscribers was false or misleading because there was an undisclosed third option, the Microsoft 365 Personal or Family Classic plans, which allowed subscribers to retain the features of their existing plan, without Copilot, at the previous lower price.

The ACCC says Microsoft’s communication with subscribers did not refer to the existence of the “Classic” plans, and the only way subscribers could access them was to begin the process of cancelling their subscription.

This involved navigating to the subscriptions section of their Microsoft account and selecting “cancel subscription”.

However, it was only on the following page that subscribers were given the option to instead move to the Classic plan.

“Following a detailed investigation, 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,” says ACCC chair Gina Cass-Gottlieb.

“The Microsoft Office apps included in 365 subscriptions are essential in many people’s lives and given there are limited substitutes to the bundled package, cancelling the subscription is a decision many would not make lightly.

“We’re concerned that Microsoft’s communications denied its customers the opportunity to make informed decisions about their subscription options, which included the possibility of retaining all the features of their existing plan without Copilot and at the lower price.”

Cass-Gottlieb says the ACCC believes that many Microsoft 365 customers would have opted for the Classic plan had they been aware of all the available options.

The ACCC says Microsoft sent two emails and published a blog post to inform auto-renewing subscribers, as of 31 October 2024, about the Copilot integration and the impending price increase that would apply at their next renewal. These three pieces of communication are central to the ACCC’s case.

“We allege that Microsoft’s two emails to existing subscribers and the blog post were false or misleading as they conveyed that consumers had to accept the more expensive Copilot-integrated plans, and that the only other option was to cancel,” says Cass-Gottlieb.

“All businesses need to provide accurate information about their services and prices. Failure to do so risks breaching the Australian Consumer Law.”

In establishing its investigation into this matter, the ACCC drew on a wave of consumer reports, as well as commentary in online forums such as Reddit.

The ACCC says information provided by consumers to its Infocentre was critical to alerting the ACCC to the alleged conduct, particularly in identifying the availability of the Classic plan through subscribers’ cancellation flows.

The ACCC is seeking orders including penalties, injunctions, declarations, consumer redress, and costs.