‘Epic fail’: Microsoft refund offer backfires

1 hour ago 3

Microsoft customers who were allegedly misled into paying for more expensive software plans say a refund offer from the company is inaccessible, as Australia’s consumer watchdog vows to push ahead with legal action seeking penalties and redress from the tech giant.

The tech giant apologised and offered refunds to customers on Thursday after the Australian Competition and Consumer Commission (ACCC) last week alleged in the Federal Court that Microsoft misled 2.7 million Australians over subscription costs so they would remain on more expensive plans.

Microsoft has begun contacting affected customers about “a subscription alternative that we could have communicated more clearly”.

The ACCC’s allegations relate to how Microsoft communicated price increases to customers of its Copilot AI assistant and Microsoft 365 plans, which include software such as Word, Excel and PowerPoint.

The consumer watchdog claims that since October 31, 2024, Microsoft had told subscribers of its 365 Personal and Family plans with auto-renewals that to maintain their subscription, they “must accept the integration of Copilot and pay higher prices for their plan, or, alternatively, cancel their subscription”.

This information was false or misleading, the ACCC alleges, 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.

“Microsoft’s communication with subscribers did not refer to the existence of the ‘Classic’ plans, and the only way subscribers could access them was to begin the process of cancelling their subscription,” the consumer commission said.

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

On Thursday, Microsoft began contacting affected customers about “a subscription alternative that we could have communicated more clearly”.

“In hindsight, we could have been clearer about the availability of a non-AI-enabled offering with subscribers, not just to those who opted to cancel their subscription,” Microsoft said in a statement.

“In our email to subscribers [on Thursday], we expressed our regret for not being clearer about our subscription options, shared details about lower-priced alternatives that come without AI and offered a refund to eligible subscribers who wish to switch.”

Microsoft said the episode “fell short of our standards”. “We will learn from this and improve,” the company said.

However, this masthead has been contacted by multiple affected customers who received the offer from Microsoft on Thursday, reporting an error.

Those pushed onto the more expensive Microsoft 365 Family plan that included Copilot AI said that when they click the link to downgrade to the “Family Classic” plan they had previously been on and trigger the retrospective refund, they are not offered it as an option. Instead, the customers say they can only downgrade to a Personal Classic plan designed for a single user rather than a family licence.

“One would have hoped that Microsoft would have checked this before sending out the mass email, but here we are,” one aggrieved customer said.

“An epic fail by Microsoft,” said another customer.

Microsoft has been contacted for comment.

Also on Thursday, ACCC chair Gina Cass-Gottlieb said while she welcomed Microsoft’s apology and refund offer, it had not come out of a settlement with the watchdog over its legal case.

“We continue to seek penalties, injunctions, declarations, effective consumer redress and costs in court,” Cass-Gottlieb said.

The maximum penalty under consumer law is the greatest of $50 million; three times the total benefits that were obtained by the breach; or 30 per cent of the corporation’s adjusted turnover during the breach period.

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