Microsoft is now facing legal action from Australia’s competition regulator, the Australian Competition and Consumer Commission (ACCC), over its pricing strategy tied to integrating the Copilot AI assistant into the Microsoft 365 consumer suite.
The lawsuit, filed in the Federal Court, alleges that the tech giant misled approximately 2.7 million individual and family plan subscribers by effectively concealing cheaper, non-AI subscription options—pushing consumers to pay price hikes of up to 45%. The case has drawn global attention as one of the first major regulatory tests of how Big Tech monetizes its increasingly ubiquitous generative AI services.
The ACCC’s complaint centers on what it describes as deliberate “choice architecture” designed to steer users toward higher-revenue offerings. Following Copilot’s launch in October 2024, Microsoft communicated—primarily through two emails and a blog post—that auto-renewing customers would see their Microsoft 365 Personal plan annual fee increase from AUD 109 to AUD 159, and the Family plan rise from AUD 139 to AUD 179. Regulators argue these notices failed to disclose the continued availability of “Classic” plans, which retain original features and pricing but exclude the Copilot add-on.
A central allegation is that the cheaper, non-AI option was only revealed after consumers initiated the cumbersome cancellation process—a tactic ACCC Chair Gina Cass-Gottlieb characterized as a calculated omission. The regulator contends this digital design choice deliberately withheld material information, constituting a clear breach of Australia’s consumer protection laws. Given that Microsoft 365 bundles essential applications like Word and Excel, many users likely opted to absorb the higher cost rather than endure the professional and personal disruption of canceling a near-utility service. The ACCC asserts Microsoft exploited this dependency to extract a premium for a feature many subscribers neither needed nor actively used.
The price increases—45% for Personal plans and 29% for Family plans—represent an automatic revenue boost for Microsoft’s thriving consumer segment, which reported over 80 million subscribers in its latest filing. Even modest uptake of Copilot among this base could translate into hundreds of millions of dollars in annual recurring revenue (ARR).
The legal action targets both Microsoft Australia and its U.S. parent company, reinforcing the ACCC’s aggressive stance on digital platform accountability—a posture previously demonstrated in cases against Google and Meta. Should the ACCC prevail, penalties could be substantial: under Australian law, fines may reach up to AUD 50 million per violation or a percentage of the company’s turnover linked to the alleged misconduct, whichever is higher.
Beyond financial consequences, a successful prosecution would establish a powerful international precedent for regulatory oversight of generative AI bundling. As dominant platforms roll out high-value, high-cost features, this case is expected to compel courts to clarify the boundary between aggressive—but legal—product upselling and deceptive conduct.
