Microsoft Sued: Australia Claims 2.7 Million Customers Misled By AI Price Hike

In a massive and expensive lawsuit, Australia's competition regulator has launched a legal challenge against Microsoft, accusing the tech giant of misleading roughly 2.7 million Australians into accepting much higher subscription prices by bundling artificial intelligence tools without clear disclosure.

The case has raised a firestorm in the country as questions about how major tech firms communicate price changes and product structuring to consumers in an era of rapidly evolving AI offerings are rising.

Why The ACCC Sued Microsoft

According to the Australian Competition and Consumer Commission (ACCC), Microsoft reportedly raised the annual cost of its Microsoft 365 Personal plan by about 45 percent to AUD 159 (roughly £82) and increased the Family plan by around 29 percent to AUD 179 (about £92) after adding its Copilot AI assistant. Moreover the regulator reportedly says Microsoft failed to clearly explain that a cheaper 'classic' version of the service was still available for customers who did not want Copilot.

That option, the ACCC says reportedly, was only disclosed once a consumer initiated the cancellation process. Furthermore, the watchdog views this as a failure to disclose material information and as creating a misleading impression of consumer choice, which breaches Australian consumer law. However as of this writing, Microsoft has said it is reviewing the ACCC's claim in detail.

Understanding Microsoft Copilot

Microsoft Copilot is an AI assistant integrated into Microsoft 365 products such as Word, Excel, PowerPoint and Outlook. Moreover, it uses large language models similar to OpenAI's technology to generate text, summarize documents, create slides, and even analyze data inside spreadsheets. So in essence, it acts as a digital helper that automates repetitive tasks and provides writing or data suggestions in real time. The addition of Copilot was one of Microsoft's most important product evolutions in years, aiming to make everyday productivity more efficient through AI.

However, Copilot is not a standalone application; it is built directly into the Microsoft 365 ecosystem. The ACCC's complaint hence centres on whether Microsoft clearly explained that the higher prices were tied to the Copilot upgrade and that consumers had a choice to keep using Microsoft 365 without it.

Implications for Microsoft and consumers

Microsoft could end up paying millions, if the court finds in favour of the ACCC. Under Australian consumer law as per sources, the maximum penalty for each breach is the greater of AUD 50 million (£26 million approx), three times the benefits the firm obtained that are reasonably attributable to the breach, or 30 per cent of the company's adjusted turnover during the period if benefits cannot be determined.

Moreover, beyond financial consequences for Microsoft, the case brings to light the larger risks companies face as they shift traditional subscription models to incorporate AI features. And for consumers, the case shows that regulators are paying close attention to how pricing and product options are conveyed in the context of AI enhanced services.

Therefore, in practical terms, December's legal action may prompt Microsoft and other software firms to revise how they structure and communicate plan tiers, especially when new AI features are introduced. For users in Australia, the case could lead to enhanced transparency or even compensation if the court orders redress.

Originally published on IBTimes UK