Microsoft Faces Legal Action Over AI-Driven Price Hikes

Australian regulator alleges misleading conduct tied to Copilot integration.

Australia’s consumer watchdog has filed a lawsuit against Microsoft, accusing the company of misleading millions of users over subscription changes to its Microsoft 365 software. The Australian Competition and Consumer Commission (ACCC) claims that around 2.7 million customers were led to believe they had to upgrade to more expensive plans bundled with the AI assistant Copilot. Following the integration of Copilot in October 2024, the Personal plan rose by 45% to A$159, while the Family plan increased by 29% to A$179. According to the ACCC, Microsoft failed to clearly inform users that a cheaper, non-AI “classic” plan remained available.

Allegations of Concealed Options

The ACCC argues that Microsoft’s design choices created a false impression of limited subscription options. Customers reportedly only discovered the cheaper plan during the cancellation process, which the regulator says violates Australian consumer law. Communications sent via email and blog posts did not mention the classic plan, instead focusing on the upcoming price increases at auto-renewal. This lack of transparency is central to the ACCC’s case, which seeks penalties, consumer redress, and injunctions against both Microsoft Australia and its U.S. parent company.

Microsoft responded by stating it is reviewing the claims in detail but did not offer further comment. The ACCC emphasized that any penalties would be determined by the Federal Court based on its findings. Under Australian law, the maximum penalty per breach could be A$50 million, three times the benefit gained, or 30% of adjusted turnover during the breach period. The regulator declined to speculate on the outcome, citing the court’s discretion.

Pricing Strategy Under Scrutiny

The lawsuit highlights growing regulatory attention on how tech companies monetize AI features. Microsoft’s bundling of Copilot into consumer plans is seen as part of a broader strategy to integrate generative AI across its product suite. Critics argue that the rollout lacked clarity, especially for users unfamiliar with the implications of Copilot’s inclusion. The ACCC’s complaint suggests that the pricing shift may have been designed to steer users toward higher-cost plans without fully disclosing alternatives.

This case is being closely watched as a potential precedent for future AI-related pricing disputes. Regulators globally are examining how companies present AI upgrades and whether consumers are given meaningful choices. Microsoft’s approach to Copilot may serve as a test case for balancing innovation with fair marketing practices. The outcome could influence how other firms structure their AI offerings in subscription models.

Legal and Industry Implications

The ACCC’s action reflects a broader concern about “choice architecture” — the way companies design user interfaces to influence decisions. By placing the cheaper plan behind a cancellation prompt, Microsoft may have limited informed consent among subscribers. Legal experts note that such practices, if proven, could lead to significant financial penalties and reputational damage. The case also raises questions about how AI features are marketed and whether they justify substantial price increases.