Australia Sues Microsoft Over Misleading AI Subscription

Australia has taken Microsoft to court over claims that the tech giant misled around 2.7 million Australian customers about price increases for Microsoft 365 subscriptions after integrating an AI assistant called Copilot. The Australian Competition and Consumer Commission (ACCC), Australia's consumer watchdog, filed proceedings in federal court on October 27, 2025, accusing Microsoft Australia and its parent company of deceptive conduct.

According to the ACCC, since October 31, 2024, Microsoft told subscribers to Microsoft 365 Personal and Family plans with auto-renewal enabled that they had to accept Copilot integration and pay higher prices to keep their subscriptions active or cancel them. What the ACCC alleges is misleading is that Microsoft failed to disclose a third option: customers could have kept a “Classic” plan with the same features as before but without Copilot, at the lower price. This Classic plan was not mentioned upfront and could only be accessed by initiating the process to cancel the subscription, after which users were offered the chance to switch to the Classic plan instead of cancelling.

This omission created a false impression that customers had only two choices: accept the price hike with AI features or cancel completely. The ACCC claims this limited choice was intended to push more customers toward the pricier, AI-integrated Microsoft 365 plans. The price increase was notable, with the Personal plan rising by 45% to about AUD 159 and the Family plan by 29% to around AUD 179 annually.

The lawsuit highlights growing concerns about how big technology companies communicate subscription changes, especially when adding AI features that boost costs. Transparency is a key issue, as customers need clear information to make informed decisions about their subscriptions.

Microsoft has responded by stating it is reviewing the claims carefully and emphasized that consumer trust and transparency are priorities. The company also said it remains committed to cooperating constructively with regulators and ensuring its practices comply with legal and ethical standards.

From a broader perspective, this legal case in Australia could set an important precedent for how subscription services integrate AI technologies in the future. It raises questions about the balance between monetizing new AI capabilities and maintaining clear, honest communication with customers. For consumers, it serves as a reminder to carefully read subscription notices and explore options fully before renewal.

In summary, the case is less about the inclusion of AI itself and more about how changes are communicated and how choices are presented to users. The Federal Court’s decision will likely influence future regulatory and corporate approaches to AI-driven product changes worldwide, as companies navigate the evolving AI-first economy and consumer rights in this new era.

With inputs from agencies

Image Source: Multiple agencies