In a move that underscores Australia's reputation for robust consumer protection, the Australian Competition and Consumer Commission (ACCC) has taken Microsoft to court, accusing the tech giant of misleading 2.7 million subscribers into paying inflated prices for its Microsoft 365 service.
The lawsuit, filed in the Federal Court on October 26, 2025, centers on Microsoft's integration of its AI tool, Copilot, into existing plans - a change that drove up costs without clearly disclosing cheaper alternatives. This case highlights a growing divergence in how regulators worldwide are tackling Big Tech's subscription tactics, particularly as AI features become bundled into everyday software.
The Copilot Controversy: Hidden Options and Skyrocketing Prices
The saga began in October 2024, when Microsoft rolled out Copilot - a generative AI assistant designed to enhance productivity in apps like Word, Excel, and Teams - across its Microsoft 365 subscriptions. For many users, this sounded like a free upgrade. However, the reality was far less benevolent. The company quietly hiked prices on its popular Personal and Family plans to cover the AI integration, but failed to inform customers of a key detail: a "Classic" version of the plans remained available at the original, lower rates, sans Copilot.
Specifically, the annual Personal plan jumped 45% from A$109 to A$159, while the Family plan rose 29% from A$139 to A$179. Emails and notifications sent to auto-renewing subscribers painted a binary picture: either accept the pricier Copilot-enhanced plan or cancel your subscription entirely.
Buried in the fine print - or, more accurately, revealed only during the cancellation process - was the third option: sticking with the Classic plan at the old price, retaining all core features like Office apps, OneDrive storage, and Teams collaboration, just without the AI bells and whistles.
ACCC Chair Gina Cass-Gottlieb didn't mince words in her statement: "We're concerned that Microsoft's communications denied its customers the opportunity to make informed decisions about their subscription options."
The regulator alleges this omission violated multiple sections of the Australian Consumer Law, including prohibitions on false or misleading representations about rights and conditions.
By design, the ACCC claims, Microsoft steered users toward higher-revenue plans, potentially costing millions in unintended overpayments.
Microsoft, for its part, has responded measuredly. A spokesperson stated that "consumer trust and transparency are top priorities" and that the company is "reviewing the ACCC's claim in detail" while committing to work constructively with regulators. The integration of Copilot, launched globally in early 2025, was part of Microsoft's broader push to monetize its massive AI investments, but this Australian scrutiny could signal ripple effects elsewhere.
Hefty Penalties on the Horizon: A Test for Tech Accountability
If the Federal Court rules in favor of the ACCC, Microsoft could face substantial fines. Under Australian law, penalties for each breach can reach the greater of A$50 million, three times the benefit gained from the misconduct, or 30% of the company's adjusted turnover during the violation period.
Given Microsoft's scale - its Australian operations alone generate billions in revenue - the latter could amount to eye-watering sums. The ACCC is also seeking injunctions to halt similar practices and redress for affected consumers, potentially including refunds for those who unwittingly upgraded.
This isn't Australia's first rodeo with Big Tech. The ACCC has been at the forefront of digital economy enforcement, from probing Google and Meta's ad practices to advocating for a News Media Bargaining Code that forced payments to local publishers. In this instance, the lawsuit arrives amid heightened focus on AI's consumer impacts, positioning Australia as a potential bellwether for global regulators grappling with how tech firms bundle and price emerging technologies.
The Dark Side of Subscriptions: Loyalty as a Liability
At its core, this Microsoft case exposes a broader malaise in the subscription economy: the "loyalty penalty." Many services - far beyond tech behemoths - employ similar dark patterns, where long-term subscribers pay a premium for their fidelity, while newcomers snag introductory deals or discounts dangle only for those threatening to leave. It's a tactic that taints even reputable offerings, from niche news outlets to streaming platforms, where fixed costs mean retention trumps fairness.
Consider the irony: a devoted user who auto-renews without fuss ends up footing a higher bill, while the savvy (or disgruntled) canceller unlocks a "loyalty discount" or the original low rate. This not only erodes trust but punishes inertia - the very behavior companies claim to reward. As one consumer advocate noted in response to the ACCC action, such practices "may have suffered economic harm through the automatic renewal," turning passive loyalty into active exploitation.
So, what's a subscriber to do? A simple, low-risk strategy: Before renewal, initiate cancellation across your services. If a discount materializes, weigh it against your needs. If not, walk away - you lose nothing and can always resubscribe later when the itch strikes. It's a hack that flips the script, forcing companies to earn your business rather than banking on forgetfulness.
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A Win for Consumers? Wishing Australia Luck
Australia's regulators deserve credit for calling out these maneuvers head-on, potentially setting a precedent that echoes beyond its shores. If the court validates the ACCC's claims, it could embolden similar probes in the EU, US, or elsewhere, where Microsoft's Copilot rollout mirrored these tactics. For now, the case serves as a stark reminder: In the age of AI-driven subscriptions, vigilance isn't optional - it's essential.
Kudos to the ACCC for keeping Big Tech on its toes. Here's hoping for a ruling that levels the playing field for everyday users.
