Australia’s consumer watchdog has launched a high-stakes lawsuit against Microsoft, accusing the tech giant of deceptive practices that allegedly duped 2.7 million customers into pricier Microsoft 365 plans bundled with AI features like Copilot. The Australian Competition and Consumer Commission (ACCC) claims Microsoft’s communications omitted a key option, steering users toward upgrades amid rising costs for cloud-based productivity tools.
Filed in Federal Court on October 27, 2025, the ACCC lawsuit targets Microsoft’s handling of subscription renewals starting October 2024. Customers received emails and in-app notices warning of price hikes—from AUD 99 to AUD 129 annually for personal plans—framed as necessary to integrate Copilot’s generative AI capabilities. Prosecutors allege Microsoft presented only two paths: upgrade to the AI-enhanced version or downgrade to a stripped-down Personal Classic plan without Copilot. Buried in fine print or absent entirely, however, was the ability to renew existing “classic” plans at the original rate, potentially saving users up to 30%.
This isn’t Microsoft’s first brush with regulators Down Under; past probes have scrutinized its cloud dominance and bundling tactics. The ACCC argues the omissions breached Australian Consumer Law’s prohibitions on misleading conduct, seeking penalties up to AUD 50 million per violation, court declarations of wrongdoing, and injunctions to halt similar practices. Microsoft’s Australian arm adopted these messages as the direct seller, per the filing, amplifying the deception’s reach.
Legal experts view the case as a bellwether for AI pricing transparency. “Tech firms are racing to monetize AI, but regulators won’t tolerate sleight-of-hand,” says University of Sydney antitrust scholar Caron Beaton-Wells, noting parallels to global scrutiny of subscription traps. Consumer groups echo frustration: Choice CEO Alan Kirkland called it “a classic bait-and-switch,” urging Aussies to review billing histories.
For U.S. readers, this ACCC action against Microsoft signals ripple effects in cross-border tech accountability. American firms face similar FTC probes into dark patterns and AI upselling, potentially hiking compliance costs and subscription fees stateside. With Microsoft 365 powering 400 million global users, precedents here could reshape how Big Tech discloses AI add-ons, impacting enterprise budgets and personal productivity tools amid economic pressures.
The saga unfolds as AI integration accelerates; Microsoft defends its moves as voluntary enhancements, but court dates loom in early 2026. Watch for broader fallout if penalties stick, testing the limits of innovation versus fair play in the subscription economy.
By Sam Michael
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