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Microsoft has apologised to customers and offered refunds days after the consumer watchdog launched legal action against the tech giant, alleging it misled 2.7 million Australians over subscription costs so they would remain on more expensive plans.
Last week, the Australian Competition and Consumer Commission (ACCC) began proceedings in the Federal Court against Microsoft Australia and its parent company, Microsoft Corporation, over how it communicated price increases to customers of its Copilot AI assistant and Microsoft 365 plans, including software such as Word, Excel and PowerPoint.
Microsoft has begun contacting affected customers about “a subscription alternative that we could have communicated more clearly”.Credit: Bloomberg
The ACCC alleged that since October 31, 2024, Microsoft had told subscribers of its 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”.
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 watchdog 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.”
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Microsoft said the episode “fell short of our standards”. “We will learn from this and improve,” it said.
The ACCC’s legal action is seeking penalties and consumer redress orders for Microsoft. The maximum penalty under consumer law is the greater 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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