Microsoft in damage control over Copilot bundling bungle

Microsoft Australia has moved to minimise potential damage from the competition regulator’s federal court bid to penalise it for the way it sold M365 subscription packages.

The Australian Competition and Consumer Commission (ACCC) last Tuesday accused the company of misleading 2.7 million Australians about pricing options for its M365 plans when bundling its AI agent Copilot into subscriptions.

The ACCC alleged that Microsoft deliberately concealed a subscription option that would have allowed customers to not pay extra to access Copilot.

Overnight, Microsoft offered its Australian customers refunds which might tally into the millions of dollars.

It followed up today with a statement shared with iTnews.

“In hindsight, we could have been clearer about the availability of a non-AI enabled offering with subscribers, not just to those who opted to cancel their subscription," the company wrote.

“In [an] email to subscribers [overnight], we expressed our regret for not being clearer about our subscription options, shared details about lower-priced alternatives that come without AI and offered a refund to eligible subscribers who wish to switch."

The email that Microsoft sent to subscribers proceeded along similar lines but also contained details about how its customers could seek a remedy.

It told customers they could take no action and stay on their current subscription or “switch to” the classic version of the M365 subscription and receive a refund.

The classic version of the subscription is the option that the ACCC accused Microsoft of deliberately hiding from its customers.

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

The ACCC told the court that hiding the availability of the classic plan “minimised the number of consumers opting out of AI integration and increased pricing”.

Customers were facing an annual price hike of $50 to cover the extra cost of including Copilot in Microsoft 365 Personal edition, at a total cost of $159.

In the case of those on auto-renewing plans, it was to be charged automatically unless the customers switched to classic.

The ACCC alleged to the court that, by design, Microsoft minimised the number of customers that would move back to the classic option by hiding it.

The regulator told the court it gave customers only seven days warning of the impending price hike and made no mention of the unbundled option in its customer communications.

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

It’s not known how many customers might be eligible for the refund nor how many will take up the offer.

However, based on pricing for the subscriptions in October 2024, it could reportedly have to pay back up to $175 million if a large portion of its customers reject the option to have Copilot and revert to the unbundled plan.

iTnews has contacted Microsoft for further comment.