Hidden Choices: ACCC sues Microsoft for allegedly concealing cheaper Microsoft 365 plans

Last month, the Australian Competition and Consumer Commission (ACCC) initiated proceedings in the Federal Court against Microsoft Corporation and its Australian subsidiary, Microsoft Pty Ltd, alleging that they had engaged in misleading conduct concerning Microsoft 365 subscription pricing and the integration of its artificial intelligence (AI) capabilities. The ACCC is focused on Microsoft’s alleged failure to clearly disclose a lower-cost subscription option, known as the “Classic Option”, to consumers until late in the cancellation process and in a way that wasn’t obvious to most of them.  The case is interesting because Microsoft’s approach could amount to what is commonly known as an “unfair practice” or “dark pattern”, which are currently not prohibited under the Australian Consumer Law (ACL). Although not currently prohibited, these practices were the focal point of a Consultation Paper authored by the Australian Treasury last year, as they may fall within existing gaps or ‘grey areas’ within ACL. The matter is therefore a test case for the standards of behaviour and disclosure expected of businesses under current consumer protection laws.

Background

As of 31 October 2024, Microsoft has integrated its AI tool, Copilot, into its Microsoft 365 Personal and Family subscription bundles. A price increase accompanied this change:

• Microsoft 365 Personal: from $109 to $159 annually
• Microsoft 365 Family: from $139 to $179 annually

Microsoft communicated these changes to its customers by two emails and a blog post, presenting subscribers with only two options:

1. Continue their subscription with Copilot at the increased price; or
2. Cancel their subscription.

However, a third option, the “Classic Option”, allowed subscribers to retain their existing plan without Copilot and at the original price. This option was not disclosed to consumers in the initial communications and was only revealed if a customer initiated the cancellation process. Microsoft’s storefront webpages also failed to mention the Classic Option, instead promoting only the more expensive AI-integrated bundles.

ACCC’s allegations

The ACCC alleges that Microsoft engaged in misleading or deceptive conduct and/or made false or misleading representations as to the price, need and the supply, possible supply of the goods and/or services in contravention of sections 18 and 29(1)(i), (l), and (m) of the Australian Consumer Law (ACL). Specifically, the ACCC claims that Microsoft:

• failed to disclose the Classic Option unless a customer attempted to cancel;
• represented that it was mandatory to accept AI integration to maintain access to Microsoft 365 (the “Copilot Necessity Representation”);
• represented that existing subscribers had to pay higher prices to maintain access to their bundle subscription (the “Price Necessity Representation”); and
• implied that subscribers had only two options: to accept the AI integration bundle and pay the higher price at the next renewal, or to cancel their subscription (the “Options Representation”).

These representations were said to have been conveyed both explicitly and implicitly through Microsoft’s communications. 

At the time proceedings were commenced, ACCC chair, Ms Gina Cass-Gottlieb, stated:

“We’re concerned that Microsoft’s communications denied its customers the opportunity to make informed decisions about their subscription options, which included the possibility of retaining all the features of their existing plan without Copilot and at the lower price”. 

The ACCC is seeking declarations, penalties, and other orders from the Federal Court, including remedies for affected consumers.

Possible impact on consumers

The ACCC argues that many consumers may have unknowingly paid higher prices or accepted AI features they did not want or need, believing they had no alternative. This may have resulted in financial loss, as consumers were not made aware of the Classic Option at the time of renewal. 

Microsoft’s response and refund offer (November 2025)

This month, following the ACCC’s legal action, Microsoft issued a public apology to affected Australian customers. The company acknowledged it “fell short of our standards” and admitted it could have communicated more clearly about the availability of a non-AI-enabled “Classic” subscription option. Microsoft is now offering refunds to eligible subscribers who switch from the AI-enabled Microsoft 365 Personal or Family plans back to the Classic plan (without Copilot) by 31 December 2025. 

The ACCC welcomed Microsoft’s move but emphasised that the refund offer was not the result of a settlement, and that the regulator continues to seek penalties, injunctions, and other remedies in the Federal Court. The case remains ongoing, with potential penalties for Microsoft under Australian consumer law.

Key takeaways 

At the heart of the case is the duty of businesses to disclose all available options (or at least indicate that more options are available) when communicating with their customers. Further, whether the failure to present such options is misleading or deceptive, or whether this constitutes a grey area in the law for which there are no presently available protections for consumers.  In recent years, the ACCC has argued that the present law does not cover such practices and, as such, requires more specific provisions directed at prohibiting “unfair practices”.

Whatever the outcome of the case, it highlights for businesses the importance of clear and transparent communication about product changes and pricing, especially when pricing or features are affected. Businesses must ensure all available options and material information are disclosed to consumers; failure to do so may constitute misleading or deceptive conduct. 

This case also signals the ACCC’s continued focus on digital platforms and subscription models, particularly where auto-renewal and AI integration are involved. Businesses operating in these areas should expect increased scrutiny and should proactively review their compliance with consumer law obligations. It will also be of great interest to those following the ACCC’s efforts to seek further protections for consumers for “dark patterns” and “unfair practices”.