ACCC accuses Microsoft of misleading 2.7 million Australians over M365 fees

Microsoft is accused of misleading 2.7 million of its Australian customers about pricing options for its Microsoft 365 plans after bundling its AI agent Copilot into subscriptions, with the competition watchdog commencing legal action in the Federal Court.

The Australian Competition and Consumer Commission (ACCC) alleges Microsoft misled customers to think they were required to pay extra for Copilot, when an option not to use Copilot and avoid the additional charges was available.

A Microsoft Australia spokesperson said the company is "reviewing the ACCC's claim in detail".

“Consumer trust and transparency are top priorities for Microsoft," the spokesperson said.

"We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”

The ACCC alleges that from late October last year, Microsoft told customers on auto-renewing subscription plans that the only way to keep using M365 was to accept the extra costs, or otherwise cancel their service.

The commission alleges Microsoft deliberately concealed a classic subscription option that would have allowed customers to continue using the software without paying extra.

This, the ACCC alleged, "minimised the number of consumers opting out of AI integration and increased pricing."

Citing blogs that Microsoft published late last year and emails that it sent to its customers in January, the ACCC said the software maker told customers it would hike up price of its customers’ annual software subscriptions for Microsoft 365 Personal edition by $50 to cover the cost of Copilot.

According to the ACCC, in April, seven days before their customers subscription plans were due to renew, Microsoft sent another email which said:

“We want to let you know about a change to the amount of your next payment. Unless you cancel two days before Saturday, April 19 2025, we’ll charge AUD 159.00 including taxes every year… We’ll tell you if this price ever changes.

"Cancel any time to stop future charges or change how you pay by managing your subscription in your Microsoft account."

Microsoft then automatically charged the customers without making them aware the cheaper option was available, the ACCC said.

The ACCC said it would be seeking “penalties, injunctions, declarations, consumer redress, and costs”.

It did not disclose the size of the penalty it would be seeking from the court however, under Australian law, the maximum penalty for each breach is the greater of $50 million or triple the financial benefit from the conduct.