Microsoft Faces Legal Battle in Australia Over Hidden Cheaper 365 Plans Amid AI Upgrade

Microsoft is being sued by Australia's competition regulator, the ACCC, which accuses the software giant of misleading 2.7 million Microsoft 365 customers about subscription options following integration of its AI assistant, Copilot.

The ACCC alleges Microsoft forced users to pay sharply increased prices for plans with Copilot or cancel their subscriptions without clearly disclosing a cheaper alternative.

The regulator claims that the so-called "Classic" Microsoft 365 Personal and Family plans, which retain the original features without Copilot and the associated price hike, were concealed and only discoverable deep within the cancellation flow.

The Australian Competition and Consumer Commission filed proceedings against both Microsoft Australia and its U.S. parent company on Sunday.

The complaint centers on practices after October 31 last year, when Microsoft included Copilot in Microsoft 365 plans and raised prices.

According to the ACCC, Microsoft’s communications to auto-renewing subscribers only presented two options: accept the higher-price Copilot plan or cancel the subscription.

The third option—remaining on Classic plans at lower prices—required navigating to the subscription section, selecting cancellation, and proceeding through multiple steps to finally encounter this option.

Hidden “Classic” Plan Sparks Regulator’s Claims

Gina Cass-Gottlieb, ACCC Chair, stated the regulator will argue in court that Microsoft deliberately left out any mention of Classic plans in customer communications, concealing their existence until after users began cancellation to push more consumers toward pricier Copilot plans.

She said this tactic misled customers and amounted to an attempt to boost revenue at their expense.

This legal challenge raises significant questions about transparency and consumer rights amid the rapid rollout of AI integration in software products. Microsoft has yet to respond publicly to the lawsuit.

Microsoft 365’s AI Copilot feature represents the company’s push to incorporate generative AI tools directly into widely used productivity software.

However, this case illustrates the challenges of balancing innovation with fair customer practices.

For millions of users, locked into auto-renew subscriptions, this situation has led to frustrations and allegations of deceptive marketing.