Microsoft Australia heads to court due to misleading M365 subscriptions

ACCC alleges the tech giant mislead customers over communicating subscription options and price increases.

Microsoft Australia and its parent company, Microsoft Corporation has found itself in hot water after the Australian Competition and Consumer Commission (ACCC) alleged that it mislead customers over an increase in prices for its Microsoft 365 plans.

The consumer watchdog noted that Microsoft Australia mislead nearly 2.7 million Aussie customers when communicating subscription options and price increases, after it integrated its AI assistant, Copilot, into Microsoft 365 plans.

Since 31 October 2024, the ACCC alleged that Microsoft has told subscribers of Microsoft 365 Personal and Family plans with auto-renewal enabled that to maintain their subscription they must accept the integration of Copilot and pay higher prices for their plan, or, alternatively, cancel their subscription.

The commission alleged that this information provided to subscribers was false or 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.

The ACCC said there was no reference to a “classic” plan that was only available via a subscription cancellation.

Gina Cass-Gottlieb, chair at the ACCC said following a detailed investigation, the ACCC 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.

“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 the lower price.

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

A Microsoft spokesperson told CRN Australia, “Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC's claim in detail.

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

Following the integration of Copilot, the annual subscription price of the Microsoft 365 Personal plan increased by 45 per cent from $109 to $159. The annual subscription price for the Microsoft 365 Family plan increased by 29 per cent from $139 to $179.

Microsoft sent two emails and published a blog post to inform auto-renewing subscribers (as of 31 October 2024) about the Copilot integration and the impending price increase that would apply at their next renewal.

The ACCC noted that these These three pieces of communication are central to its case.

“We allege that Microsoft’s two emails to existing subscribers and the blog post were false or misleading as they conveyed that consumers had to accept the more expensive Copilot-integrated plans, and that the only other option was to cancel,” Cass-Gottlieb said.

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

In establishing its investigation into this matter, the ACCC drew on a significant number of consumer reports, as well as commentary in online forums such as Reddit.

Information provided by consumers to the ACCC’s Infocentre was critical to alerting the ACCC to the alleged conduct, particularly in identifying the availability of the Classic plan through subscribers’ cancellation flows.

The ACCC is seeking orders including penalties, injunctions, declarations, consumer redress, and costs.