Microsoft Sued for Allegedly Misleading Millions of Aussies to Pay for Pricier Subscriptions

The ACCC alleged that Microsoft concealed an option for customers to retain their existing subscription plans unchanged when announcing the price increases.

A sign at a Microsoft store in New York City on July 26, 2023. Samira Bouaou/The Epoch Times

Australia’s consumer watchdog has taken Microsoft to court, accusing the tech giant of misleading nearly 3 million customers over recent price increases to its office software.

On Oct. 27, the Australian Competition and Consumer Commission (ACCC) announced that it has filed a lawsuit in the Federal Court against Microsoft Australia and its U.S. parent company, Microsoft Corporation.

The ACCC alleged that Microsoft had misled around 2.7 million Microsoft 365 users since Oct. 31, 2024, when the company informed them of a significant price increase to their subscription plans via email communications.

Specifically, the annual subscription price of the Microsoft 365 Personal plan jumped 45 percent from $109 (US$71) to $159. The Microsoft 365 Family option, which allows up to six users to use apps such as Word, Excel, PowerPoint, and Outlook, saw a 29 percent price increase from $139 to $179 a year.

The new prices automatically took effect when consumers’ subscriptions were renewed.

The reasons for the price increase were the incorporation of two AI tools, Copilot and Designer, into Microsoft 365 Personal and Family subscriptions in Australia, New Zealand, and several other Asian countries. Copilot and Designer assist with information and content creation tasks, respectively.

At the time, Microsoft said the price increases were necessary to enhance the quality of its subscription service and to ensure “customers are among the first to access powerful AI features” in its apps.

ACCC’s Allegation

The ACCC alleged that Microsoft’s announcement of the price increase was misleading because the company failed to disclose a third option that would have allowed users to retain their existing plans.

This version, called Microsoft 365 Personal or Family Classic, is available at the previous lower price without Copilot.

However, to assess this option, users must first cancel their subscription and then resubscribe.

According to ACCC Chair Gina Cass-Gottlieb, the consumer watchdog alleged that Microsoft deliberately concealed the existence of the Classic plans in its communications to customers to make them switch to the new plans.

“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,” she said.

“We’re concerned that Microsoft’s communications denied its customers the opportunity to make informed decisions about their subscription options, which included the possibility of retaining all the features of their existing plan without Copilot and at a lower price.”

A laptop computer with Microsoft Copilot+ installed is on display in Miami, Florida, on June 18, 2024. Joe Raedle/Getty Images

Cass-Gottlieb noted that Microsoft’s action allegedly led consumers to believe they had no choice but to accept the more expensive Copilot-integrated plans, which could constitute a breach of the Australian Consumer Law.

“We believe many Microsoft 365 customers would have opted for the Classic plan had they been aware of all the available options,” she said.

“All businesses need to provide accurate information about their services and prices. Failure to do so risks breaching the Australian Consumer Law.”

The ACCC is seeking penalties, injunctions, declarations, consumer redress, and costs from Microsoft Australia and its parent company.

Under Australian Consumer Law, a corporation may face a maximum penalty of $50 million, three times the total benefits obtained, or 30 percent of its adjusted turnover during the breach turnover period, whichever is greater.

Microsoft’s Response

A Microsoft spokesperson told The Epoch Times that the company is reviewing the ACCC’s lawsuit.

“Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC’s claim in detail,” the spokesperson said.

“We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”