Australia’s competition regulator is suing Microsoft, alleging the software giant deliberately misled 2.7 million customers about cheaper subscription alternatives when it forced its AI assistant, Copilot, into Microsoft 365 plans alongside steep price increases.
The Australian Competition and Consumer Commission filed proceedings on Sunday against Microsoft Australia and its U.S. parent corporation, alleging the company provided subscribers with false information about their options after integrating Copilot into personal and family plans on October 31 last year.
Microsoft reportedly told auto-renewing subscribers they had two choices: accept Copilot integration with higher prices, or cancel their subscription entirely, according to the ACCC.
The regulator alleges this was misleading because a third option existed, Microsoft 365 Personal and Family “Classic” plans that retained all original features without Copilot at the previous lower prices.
The only way customers could discover these alternatives was by navigating to their account’s subscription section, selecting “Cancel subscription,” the regulator said, and proceeding through the cancellation flow until reaching a page that finally revealed the Classic plan option.
“Following a detailed investigation, we will allege in Court that Microsoft deliberately omitted reference to the Classic plans in its communications and concealed their existence until after subscribers initiated the cancellation process to increase the number of consumers on more expensive Copilot-integrated plans,” ACCC Chair Gina Cass-Gottlieb said in a statement.
Microsoft did not immediately respond to Decrypt’s request for comment.
“With this sort of behavior, Microsoft risks its social contract with users regardless of the legal outcome,” Joni Pirovich, CEO and founder of Crystal aOS, told Decrypt. “An interesting avenue the ACCC could pursue in discovery is to ask for the reasons for Microsoft approving the rollout without disclosing the Classic option.”
The ACCC said consumer complaints and online discussions on Reddit that revealed the hidden Classic option, along with tips to its Infocentre, played a crucial role in prompting the investigation.
The watchdog is seeking orders including penalties, injunctions, declarations, consumer redress, and costs.
“Ideally, companies must present all material options prominently so consumers can make informed choices without hidden steps,” Even Alex Chandra, a partner at IGNOS Law Alliance, told Decrypt.
“Simply making an option technically available (e.g., buried in account settings or cancellation flows) is usually insufficient,” and that companies must educate users about their choices,” he added.
Microsoft also faces a U.S. class-action lawsuit this month, where eleven ChatGPT Plus subscribers allege the company choked OpenAI’s compute supply through an exclusive 2019 Azure agreement, artificially inflating ChatGPT prices while building competing AI products.