Microsoft is now facing a legal challenge from Australian competition regulator, the Australian Competition and Consumer Commission (ACCC), over a pricing manoeuvre tied to the integration of its Copilot AI assistant into the Microsoft 365 consumer suite.
The lawsuit, filed in the Federal Court, alleges that the tech behemoth misled approximately 2.7 million personal and family plan subscribers by effectively concealing a cheape, non-AI subscription option, pressuring consumers into paying price hikes as high as 45%. The case is being closely watched globally as one of the first major regulatory tests of how Big Tech firms monetize their newly ubiquitous generative AI services.
The ACCC’s complaint centers on what it terms a deliberate act of “choice architecture” designed to steer users toward higher revenue streams. Following the introduction of Copilot in October 2024, Microsoft’s communications—primarily via two emails and a blog post—informed auto-renewing customers that their annual fees for the Microsoft 365 Personal plan would jump from A$109 to A$159, and the Family plan from A$139 to A$179. The regulator asserts that these announcements failed to disclose the continued availability of the “Classic” plans, which retained the original features and pricing without the Copilot add-on.
The key allegation is that the cheaper, non-AI option was only presented to consumers after they initiated the arduous process of cancelling their subscription, a manoeuvre ACCC Chair Gina Cass-Gottlieb described as a calculated omission. This digital design choice is viewed by the ACCC as a clear breach of Australian Consumer Law by withholding material information. For a product as fundamental as Microsoft 365, which bundles essential applications like Word and Excel, the financial calculus for many consumers would have favored accepting the higher price over the professional and personal disruption of cancelling the service entirely. The action suggests that Microsoft leveraged the product’s near-utility status to extract a premium for a new feature that a significant portion of its user base may neither need nor actively use.
The price increases(a 45% hike for the Personal plan and a 29% jump for the Family plan) represent an automatic revenue uplift for Microsoft’s thriving consumer segment, which counted over 80 million subscribers as of its last report. The successful upselling of Copilot, even to a fraction of these users, translates into hundreds of millions of dollars in annualized recurring revenue (ARR).
The lawsuit against both Microsoft Australia and its US parent company extends the ACCC’s aggressive stance on digital platform accountability, following previous actions against companies like Google and Meta. Should the ACCC prevail, the financial penalties could be steep, with maximum fines under Australian law potentially reaching the greater of A$50 million per breach or a percentage of the company’s turnover tied to the alleged benefit.
In addition to this, a successful prosecution would set a powerful international precedent for regulatory oversight of GenAI bundling. The case is expected to force a judicial definition of the line between aggressive, but legal, product upselling and misleading conduct when a dominant platform introduces a high-value, high-cost feature.
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