Sydney, October 27, 2025 – In a bold escalation of its scrutiny over big tech practices, Australia's competition regulator has launched a high-stakes lawsuit against Microsoft, accusing the global software powerhouse of systematically misleading millions of customers into overpaying for its artificial intelligence features. The Australian Competition and Consumer Commission (ACCC) filed proceedings in the Federal Court on Monday, targeting Microsoft Australia Pty Ltd and its U.S. parent company, Microsoft Corporation, for what it describes as "false or misleading" conduct that potentially funneled 2.7 million Australian subscribers into pricier plans without their full knowledge.
At the heart of the dispute is Microsoft's integration of its AI assistant, Copilot, into the ubiquitous Microsoft 365 suite – a move that promised enhanced productivity through generative AI tools embedded in apps like Word, Excel, and PowerPoint. However, the ACCC alleges that starting October 31, 2024, Microsoft's communications created a false binary choice for users of Personal and Family plans with auto-renewal enabled: either accept the Copilot upgrade and the accompanying price hike, or cancel the subscription entirely. Buried in the fine print – and only revealed after users initiated cancellation – was a third option: sticking with the "Classic" versions of these plans, which retained all original features minus Copilot, at the pre-hike rates.
"This was not an oversight; it was deliberate concealment," ACCC Chair Gina Cass-Gottlieb declared in a strongly worded media release. "Microsoft omitted any reference to the Classic plans in its emails and blog post, only surfacing them as a last-ditch option during the cancellation flow. This tactic was designed to steer consumers toward the more expensive Copilot-integrated plans, denying them the chance to make informed decisions about tools essential to their daily lives."
The allegations stem from a trio of communications Microsoft sent to affected subscribers in late October 2024: two targeted emails and a now-deleted blog post on its Australian support site. These messages, the ACCC claims, unequivocally framed the Copilot rollout as mandatory for continued access, warning that price increases would hit at the next auto-renewal unless users opted out by canceling. In reality, the Classic plans – offering the full suite of Office apps without AI enhancements – remained available indefinitely, preserving the status quo for those uninterested in or wary of the new features. The watchdog's investigation, which drew on hundreds of consumer complaints funneled through its Infocentre and amplified by discussions on platforms like Reddit, uncovered a pattern of frustration among users who felt cornered into upgrading.
The financial sting was no small matter. Post-integration, the annual Microsoft 365 Personal plan surged 45% from A$109 to A$159, while the Family plan climbed 29% from A$139 to A$179 – increases the ACCC ties directly to Copilot's bundling. For the 2.7 million impacted Australians – a figure representing a substantial slice of the nation's 26 million population – this could translate to tens of millions in unintended overpayments, especially given the auto-renewal defaults that lock in charges without explicit consent. "Office apps are woven into the fabric of professional and personal workflows," Cass-Gottlieb emphasized. "With few viable alternatives to this bundled ecosystem, cancellation isn't a realistic threat for most – it's a bluff Microsoft exploited."
This isn't just about dollars; it's a flashpoint in the broader battle over AI's monetization in everyday software. Copilot, powered by OpenAI's underlying models and integrated since its global rollout in January 2025, represents Microsoft's aggressive push into generative AI, aiming to redefine productivity with features like automated summarization, data analysis, and content generation. Yet, as AI enthusiasm collides with consumer protections, regulators worldwide are probing how tech giants price and disclose these upgrades. In Australia, where digital economy enforcement is a stated ACCC priority, the case underscores a zero-tolerance stance on "dark patterns" – manipulative UI designs that nudge users toward revenue-maximizing choices.
The ACCC's suit invokes breaches of the Australian Consumer Law (ACL), specifically sections prohibiting misleading or deceptive conduct. If successful, Microsoft could face a cascade of remedies: declarations of wrongdoing, injunctions to halt similar practices, orders for consumer redress (potentially refunds for overpaid amounts), and coverage of legal costs. Penalties per violation could reach the greater of A$50 million (about US$32.5 million), three times the illicit gains, or 30% of the company's adjusted turnover during the breach period – a formula that could balloon into hundreds of millions given Microsoft's scale. "This isn't a cost of doing business," Cass-Gottlieb warned. "It's a serious violation affecting millions, and we'll pursue penalties that reflect the harm."
Consumer advocates hailed the move as a watershed. Erin Turner, CEO of the Consumer Policy Research Centre, praised the ACCC's "bravery" in confronting a "very powerful tech company" on which Australians heavily rely. "Cases like this often hinge on omissions rather than outright lies, but the effect is the same: eroded trust and economic harm," she told reporters. Turner pointed to a growing chorus of complaints, with online forums buzzing about "gotcha" tactics in subscription renewals – a tactic not unique to Microsoft but emblematic of SaaS fatigue.
For context, Microsoft's Australian footprint is massive: Over 80% of the country's businesses use its cloud services, and Microsoft 365 boasts more than 10 million domestic users across personal and enterprise tiers. The Copilot saga follows a pattern of regulatory heat on the firm; earlier this year, the ACCC probed Azure cloud pricing for anti-competitive bundling, while globally, Microsoft navigates EU antitrust suits over Teams integration and U.S. probes into AI partnerships. This Australian action, timed just months after Copilot's full deployment, signals that even AI "innovation" won't shield incumbents from transparency mandates.
As of Monday evening, Microsoft had yet to issue a formal rebuttal, though a spokesperson confirmed the company is "reviewing the ACCC's claims in detail" and remains committed to "clear communication with customers." In a brief emailed statement to Reuters, the firm reiterated its value proposition: "Copilot empowers users with AI capabilities they love, and we're proud of the transparency in our rollout." Analysts speculate a settlement could be on the table, perhaps involving proactive refunds or enhanced disclosure protocols, to avoid protracted litigation.
The Federal Court hearing is slated for early next year, but the ripple effects are immediate. Consumer groups urge affected users to contact the ACCC Infocentre for guidance on potential redress, while tech watchdogs predict this could embolden similar actions elsewhere – from the UK's CMA eyeing AI pricing to California's CCPA enforcers targeting subscription traps. In an era where AI is no longer a novelty but a staple, this lawsuit reminds: Innovation thrives on trust, not trickery.
For everyday Australians, the takeaway is stark. As subscriptions underpin modern life – from email to spreadsheets – vigilance is key. Tools like auto-renewal pauses and price-comparison apps are gaining traction, but as Cass-Gottlieb noted, "Consumers deserve options upfront, not buried in cancellation menus." Whether Microsoft pivots or fights, one thing is clear: Australia's regulators are drawing a line in the silicon sand.
