Microsoft sued for allegedly misleading millions of Australians with its AI pricing | Australian Competition and Consumer Commission (ACCC)

When Microsoft told its customers that it would increase the price of its office suite by 45%, it gave them two options: accept the price of the product (AI add-ons) or cancel.

The tech giant allegedly failed to share that a third option was available: pay the same lower price and disable the AI ​​called Copilot in Microsoft 365, according to the Australian consumer watchdog.

The Australian Competition and Consumer Commission (ACCC) took Microsoft to federal court on Monday, alleging the company misled approximately 2.7 million Australian personal and family plan customers by failing to disclose the third option, which included Copilot, in Microsoft 365 plans from October 31, 2024.

The ACCC claimed communications to customers offered only two options: pay the higher price or cancel the plan.

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The regulator claimed that this information was false or misleading because there was an undisclosed third “classic” plan option that allowed subscribers to keep the features of existing plans without Copilot at the previous lower price.

The ACCC claimed consumers were only offered this option when subscribers started canceling their subscriptions.

The annual subscription price for the Microsoft 365 personal plan, including Copilot, increased by 45%, from $109 to $159. The annual subscription price for the Microsoft 365 family plan increased by 29%, from $139 to $179.

Microsoft sent two emails and published a blog post to inform auto-renewing subscribers about the Copilot integration and expected price increase.

“We allege that two emails and blog posts that Microsoft sent to existing subscribers were false or misleading because they stated that consumers would have to accept the more expensive Copilot integrated plans and that the only other option was to cancel,” ACCC chair Gina Cass-Gottlieb said. he said.

“We will argue in court that Microsoft deliberately failed to reference classic plans in its communications and concealed their existence until subscribers initiated the cancellation process to increase the number of consumers on the more expensive Copilot integrated plans.”

Cass-Gottlieb said the office applications included in 365 subscriptions are important in many people’s lives, and given that alternatives to the bundle are limited, canceling may not be an option people take lightly, but customers may have opted for the classic plan if they were aware of all available options.

The regulator said the ACCC’s investigation drew on a significant number of consumer reports as well as online comments from sites including Reddit.

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

The maximum penalty will be the greater of three times the total benefits obtained and reasonably attributable to US$50 million or, if the total benefits cannot be determined, 30% of the company’s adjusted turnover during the breach turnover period.

“Consumer trust and transparency are top priorities for Microsoft and we are reviewing the ACCC’s claim in detail,” a Microsoft spokesperson said. “We are committed to working constructively with regulators and ensuring that our practices comply with all legal and ethical standards.”