Microsoft Australia is currently under legal scrutiny for allegedly misleading 2.7 million Australians into purchasing a more expensive Microsoft 365 subscription plan that included its AI tool, “Copilot.”

The Australian Competition and Consumer Commission (ACCC) has announced it is taking Microsoft to federal court, accusing the tech giant of disseminating false or misleading information.

According to the ACCC, in October of last year, Microsoft communicated with its users via two emails and a blog post. These communications informed subscribers of Microsoft 365 Personal and Family plans, who were on automatic renewal, that they needed to accept the addition of Copilot and pay a higher price to continue their subscription, or otherwise choose to cancel.

The ACCC claims that Microsoft misled users by omitting the fact that there was actually a third option available: retaining their existing plan without Copilot and continuing to pay the lower price under what was termed the “classic plan.”

Reportedly, subscribers were only made aware of this option to switch to a classic plan later in the cancellation process, according to the ACCC’s allegations.

This meant users who did not cancel saw the annual price for the personal plan jump 45 per cent from $109 to $159, and 29 per cent from $139 to $179 for the family plan.

ACCC Chair Gina Cass-Gottlieb alleges Microsoft “deliberately” failed to mention the classic plan and “concealed” its existence to increase the number of users on the 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.”

Microsoft 365 Personal and Family plans include Word, Excel, PowerPoint and OneNote, apps like Outlook, Teams and SharePoint and cloud services through OneDrive.

The ACCC case does not relate to Microsoft 365 Business or Enterprise plans. 

Following an investigation prompted by tip-offs and Reddit posts, the consumer watchdog believes millions of Australians have suffered economic harm.

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

Corporations in breach of consumer law could face a maximum penalty of $50 million.

Microsoft said it is reviewing the ACCC’s claim and will work to ensure its practices are legal and ethical.

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

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