Microsoft Taken to Court in Australia Over Alleged Misleading Microsoft 365 Subscription Practices

Key Takeaways

• Federal Court Action: The ACCC has initiated legal proceedings against Microsoft Australia and Microsoft Corporation over alleged misleading conduct affecting millions of subscribers.
• Concealed Classic Plan Option: Microsoft allegedly failed to disclose that subscribers could switch to a lower-cost “Classic” Microsoft 365 plan without Copilot.
• Misleading Messaging: Communications suggested customers must accept the more expensive Copilot-integrated plans or cancel, without mentioning the Classic plan.
• Significant Price Increases: Subscription fees rose 45% for Personal plans and 29% for Family plans following Copilot integration.
• Consumer Redress: The ACCC is seeking penalties, injunctions, declarations, and financial redress for impacted subscribers.

Deep Dive

The Australian Competition and Consumer Commission (ACCC) has commenced Federal Court action against Microsoft Australia and its parent Microsoft Corporation, alleging the companies misled approximately 2.7 million Australian Microsoft 365 subscribers over price increases tied to the integration of AI assistant Copilot.

According to the ACCC, since 31 October 2024, Microsoft told users with auto-renewal enabled that they needed to accept the more expensive Copilot-integrated Personal or Family plans to continue their subscription or cancel entirely.

However, the regulator says this communication was false or misleading because a third option existed. The Microsoft 365 Personal and Family “Classic” plans allowed subscribers to retain their existing features without Copilot at the previous lower price, but Microsoft did not mention these options in its messaging.

The ACCC alleges that subscribers only became aware of the Classic plans if they navigated to the cancellation process through their Microsoft account and that the company deliberately hid this path to push customers into higher-priced plans.

Price increases following the Copilot integration were substantial. The annual Personal plan rose 45% from AUD 109 to AUD 159, and the annual Family plan rose 29% from AUD 139 to AUD 179.

ACCC Chair Gina Cass-Gottlieb said Microsoft’s communications “denied its customers the opportunity to make informed decisions,” noting that many Australians rely on Microsoft Office tools and may be reluctant to cancel due to limited alternatives.

The regulator also highlighted that consumer reports, including commentary on Reddit, played an important role in revealing the hidden Classic option.

The ACCC is now seeking penalties, injunctions, declarations, consumer redress, and costs. The ACCC believes many subscribers may have suffered financial harm by paying elevated renewal prices without knowing lower-cost options existed. It is pursuing redress for impacted users of Microsoft 365 Personal and Family plans.

Subscribers who have not renewed since 8 July 2025 may still be able to select the Classic plan by starting the cancellation process, though the ACCC stresses that Microsoft controls subscription options and could change them at any time.

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