The Australian Competition and Consumer Commission (the “ACCC’) filed a lawsuit against Microsoft on Monday, claiming the company misled nearly 2.7 million Australian users into paying higher prices for Microsoft 365 software subscriptions following the integration of its AI assistant, Copilot, causing consumers economic harm.
Microsoft Corporation (“Microsoft US”) is named as the first respondent in the suit, and Microsoft Pty Ltd (“Microsoft AU”) was named as the second respondent.
As of October 31, 2024, subscribers of Microsoft 365 Personal and Family plans were notified that they had to either accept the integration of Copilot and pay higher prices for their plan or cancel. The ACCC argues Microsoft made numerous misleading representations.
The ACCC claims this information was false and misleading because there was an “undisclosed third option, the Microsoft 365 Personal or Family Classic plans, which allowed subscribers to retain the features of their existing plan, without Copilot, at the previous lower price.” There was no reference to classic plans until users attempted to cancel their subscription. Only after moving to cancel the subscription were users presented with an option to change their plan. The plan price increased by nearly 45 percent, with Microsoft 365 Personal Classic costing only AU$109.00/year, while the new Microsoft 365 Personal costs AU$159.00/year.
ACCC Chair Gina Cass-Gottlieb addressed the matter:
The Microsoft Office apps included in 365 subscriptions are essential in many people’s lives and given there are limited substitutes to the bundled package, cancelling the subscription is a decision many would not make lightly. We’re concerned that Microsoft’s communications denied its customers the opportunity to make informed decisions about their subscription options…We believe many Microsoft 365 customers would have opted for the Classic plan had they been aware of all the available options.
In establishing their case, the ACCC viewed a significant number of consumer reports and followed online commentary from users. They also included both the email about the “upcoming price change” to the Microsoft 365 subscriptions, as well as the blog about unlocking consumer “potential with Copilot and Designer in Microsoft 365.” The ACCC is seeking penalties, injunctions, declarations, consumer redress, and costs from Microsoft AU and its US parent company, Microsoft US. Corporations found guilty of breaching Australian Consumer Law face a maximum penalty of up to AU $50 million, three times the total benefits that have been obtained, or 30 percent of the corporation’s adjusted turnover during the breach turnover period.
A Microsoft representative has addressed the suit in an email, stating that the company was reviewing the claim in detail.
The ACCC, an independent Commonwealth statutory authority, is responsible for promoting competition, protecting consumers, and regulating national infrastructure services.
