Microsoft is being sued in federal court by the Australian Competition and Consumer Commission over the cost of Microsoft 365. This has gotten the tech giant into a lot of trouble. The lawsuit alleges that Microsoft misled approximately 2.7 million Australian personal and family plan customers about their subscription options. At the heart of the controversy is a significant price hike, with the annual subscription for the Microsoft 365 personal plan increasing by a staggering 45% from $109 to $159, while the family plan saw a 29% jump from $139 to $179.
Specifically, the ACCC claims that Microsoft failed to clearly inform customers that a cheaper ‘classic’ plan without Copilot was still available. Instead, Microsoft allegedly suggested that users had no choice but to upgrade to higher-priced Microsoft 365 pricing plans that included the AI assistant Copilot. This case is particularly significant for Microsoft 365 pricing in Australia, where consumer protection laws carry severe penalties. Furthermore, the situation raises questions about transparency in Microsoft Office 365 pricing strategies and how Microsoft 365 pricing for business customers might be affected moving forward.
The potential consequences for Microsoft could be severe. Under Australian consumer law, the maximum penalty for each breach is the greater of A$50 million, three times the benefits obtained, or 30% of the corporation’s adjusted turnover during the breach period, if the value of the benefits cannot be determined. Additionally, the ACCC is seeking consumer redress for those affected by the alleged misleading conduct.
ACCC Sues Microsoft Over Misleading Microsoft 365 Pricing
The Australian Competition and Consumer Commission has launched formal legal proceedings against Microsoft in a significant consumer protection case concerning Microsoft 365 pricing changes.
ACCC Files Lawsuit in Federal Court
On 27 October 2025, the ACCC filed a lawsuit in the Federal Court targeting both Microsoft Australia and its parent company, Microsoft Corporation. The regulator alleges that the tech giant engaged in “misleading or deceptive conduct” regarding how it communicated price increases and subscription options after adding its AI assistant, Copilot, to Microsoft 365 software. ACCC Chair Gina Cass-Gottlieb described it as “very serious conduct” for which the regulator would seek a significant penalty.
2.7 Million Australians Allegedly Misled
According to the ACCC, approximately 2.7 million Australian customers were affected by Microsoft’s alleged deceptive practices. As of 31 October 2024, Microsoft reportedly informed subscribers with auto-renewal enabled that they must either accept Copilot integration at higher prices or cancel their subscription. Notably, the ACCC argues that Microsoft deliberately concealed a third option—continuing with a “Classic” plan that maintained existing features without Copilot at the previous lower price.
Microsoft 365 Copilot Integration Triggers Legal Action
The controversy centres on substantial price increases that accompanied the Copilot integration. Following this change, the annual subscription price of the Microsoft 365 Personal plan rose by 45% from AUD 166.66 to AUD 243.11. Simultaneously, the Family plan increased by 29% from AUD 212.53 to AUD 273.69.
Central to the ACCC’s case are two emails and a since-deleted blog post in which Microsoft informed customers about these changes. The watchdog claims these communications “were false and misleading” as they conveyed that consumers had only two options—accept higher-priced plans or cancel—without mentioning the Classic plans. Consequently, customers could discover the cheaper alternative only after initiating the cancellation process.
In response, Microsoft stated that it is “reviewing the ACCC’s claim in detail” and considers “consumer trust and transparency as top priorities”.
Microsoft Raises Office 365 Prices With AI Copilot Integration
The controversial price hikes at the centre of Microsoft’s legal troubles began in late 2024 when the company integrated its AI assistant into consumer subscription plans. The significant price increases have sparked debate about value, transparency and consumer choice in the software subscription market.
Microsoft 365 Personal Plan Jumps 45%
The financial impact on individual subscribers has been substantial. After integrating Copilot, Microsoft raised the annual subscription price of its Microsoft 365 personal plan by a staggering 45%, increasing from AUD 166.66 to AUD 243.11. This represents one of the steepest price hikes in the company’s recent history for its consumer software offerings, affecting thousands of Australian subscribers who rely on these applications for everyday productivity.
Family Plan Increases by 29%
Household users faced a similarl steep increase in costs. The Microsoft 365 family plan, which covers multiple users under a single subscription, saw its annual cost increase by 29%, rising from AUD 212.53 to AUD 273.69. Though proportionally smaller than the personal plan increase, the absolute dollar amount still represents a significant additional expense for Australian families.
AI Copilot Bundled into New Pricing Plans
Microsoft launched Copilot as its consumer-facing generative AI product in 2023, eventually integrating it into Microsoft 365 Personal and Family subscriptions in Australia on October 31, 2024. The company’s communications—two emails and a blog post—informed auto-renewing subscribers about the integration and impending price increases that would apply at their next renewal. Nevertheless, the ACCC alleges these communications failed to mention the availability of cheaper ‘classic’ plans without the AI features.
Microsoft 365 Pricing Australia vs Global Trends
The Copilot integration was subsequently rolled out worldwide across Microsoft 365 in January 2025, with varying subscription price increases applicable to each jurisdiction. Hence, Australian consumers were among the first to experience these controversial pricing changes. For business users, Microsoft offers Copilot as an add-on service for AUAUD 68.65 per user per month, indicating a different pricing strategy for enterprise customers compared to consumer plans.
Microsoft Fails to Disclose Cheaper ‘Classic’ Plan
At the core of the ACCC’s lawsuit lies Microsoft’s alleged failure to inform customers about a third subscription option. Investigations reveal that Microsoft offered a hidden “Classic” plan, which maintains existing features without Copilot at the original prices.
Classic Plan Only Revealed at Cancellation
Users could only discover the Microsoft 365 Classic plans after initiating cancellation procedures. This required navigating to their Microsoft account’s subscription section, selecting “Cancel subscription,” and proceeding through several steps. Only then would the option to switch to a Classic plan appear. This strategy potentially prevented millions of customers from making fully informed decisions.
Emails and Blog Posts Omitted Third Option
Microsoft communicated the changes through two emails and a blog post to auto-renewing subscribers, starting on 31 October 2024. These communications allegedly presented only two choices: accept higher-priced Copilot plans or cancel subscriptions altogether. No mention was made of the Classic plan alternative.
Screenshots Show a Hidden Downgrade Path
Evidence provided by the ACCC includes screenshots showing that the Classic subscription option became visible only after users initiated cancellation procedures. These Classic plans offered identical features to previous subscriptions, minus Copilot integration.
Consumer Reports and Reddit Posts Expose Issue
The ACCC’s investigation drew heavily upon consumer complaints and online discussions. Over 100 Australian consumers filed reports with the ACCC’s Infocentre, alongside numerous Reddit posts documenting the hidden option. These collective reports proved instrumental in uncovering Microsoft’s alleged deceptive practices.
ACCC Seeks Penalties: Microsoft Responds
In response to the alleged misleading conduct, the ACCC has escalated its action against the technology giant through formal legal channels.
Potential Fines and Legal Remedies
The financial consequences facing Microsoft could be substantial. Under Australian Consumer Law, the maximum penalty for each breach is the greater of AUD 76.45 million, three times the total benefits obtained from the conduct, or 30% of the corporation’s adjusted turnover during the breach period if benefits cannot be determined. Despite these potential figures, the ACCC has stated it will not comment on what penalties the Court may ultimately impose.
Microsoft’s Official Statement on Transparency
Upon receiving notification of the lawsuit, Microsoft issued a measured response immediately. “Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC’s claim in detail,” a spokesperson stated. The company further affirmed its commitment to “working constructively with the regulator and ensuring our practices meet all legal and ethical standards”.
What Does This Mean for Microsoft 365 Pricing For Business Users?
Currently, the lawsuit targets personal and family subscription plans explicitly, rather than business offerings. Nonetheless, the outcome could potentially influence Microsoft’s future pricing transparency for all subscription tiers, including enterprise options.
Conclusion – Microsoft 365 Pricing
The Microsoft 365 pricing controversy highlights significant concerns regarding corporate transparency and consumer rights. ACCC’s legal action against the tech giant certainly marks a watershed moment for subscription-based services in Australia. Microsoft faces serious consequences, with potential fines reaching AUD 76.45 million per breach or substantial percentages of corporate turnover during the period of the violation.
Perhaps most notably, this case reveals problematic practices in subscription management. Microsoft allegedly directed millions of customers toward higher-priced options while deliberately concealing cheaper alternatives. The 45% price increase for personal plans and a 29% jump for family plans left many users unaware that they could maintain the original pricing through the hidden “Classic” plan.
Accordingly, this legal battle represents more than just a pricing dispute. The case fundamentally questions whether technology giants can unilaterally force consumers into accepting unwanted premium features at higher costs. Regardless of the final judgment, this lawsuit undoubtedly serves as a cautionary tale for subscription-based businesses worldwide about the importance of transparent communication and genuine consumer choice.
How much did Microsoft increase its subscription prices?
Microsoft raised the annual subscription price for the Microsoft 365 personal plan by 45%, from AUD 166.66 to AUD 243.11. The family plan saw a 29% increase, from AUD 212.53 to AUD 273.69. These price hikes were associated with the integration of Microsoft’s AI assistant, Copilot.
What is the ‘classic’ plan that Microsoft allegedly failed to disclose?
The ‘classic’ plan is a subscription option that maintains existing Microsoft 365 features without Copilot integration at the original, lower price. This option was reportedly only revealed to customers when they initiated the cancellation process for their subscription.
What penalties could Microsoft face in this lawsuit?
Under Australian Consumer Law, Microsoft could face maximum penalties of AUD 76.45 million per breach, three times the total benefits obtained from the conduct, or 30% of the corporation’s adjusted turnover during the breach period if benefits cannot be determined.
How has Microsoft responded to the ACCC’s lawsuit?
Microsoft has stated that it is reviewing the ACCC’s claim in detail and considers consumer trust and transparency as top priorities. The company has expressed commitment to working constructively with the regulator and ensuring its practices meet all legal and ethical standards.
