Microsoft faces lawsuit for allegedly concealing cheaper M365 subscription option

A tech giant in hot water

Australia’s competition regulator, the ACCC, has commenced Federal Court proceedings alleging Microsoft misled about 2.7 million Microsoft 365 Personal and Family subscribers.

The ACCC alleges that some auto-renewing subscribers were told they had to accept Copilot (and the higher price) or cancel their subscription. Regulators allege this was a false choice, and a third, cheaper option was deliberately concealed from view.

The mystery of the hidden plan

The ACCC says the undisclosed option was the Microsoft 365 ‘Classic’ plan, a version that retained existing features without Copilot. Most importantly, it was available at the original, lower price point that customers were already paying.

The ACCC says Microsoft’s two emails and a blog post did not refer to the Classic plan, and that the option only appeared late in the account cancellation flow, after a subscriber clicked ‘Cancel subscription’.

A forced decision for users

Customers received communications that presented them with a stark ultimatum. According to the ACCC, subscribers were told that to keep their subscription, they must accept the Copilot integration and the higher renewal price.

The other presented option was to completely cancel their service and lose access to essential apps like Word and Excel. The ACCC said that because Office apps are essential to many people’s lives, presenting only the higher-priced choice may have put consumers under pressure to accept the increase rather than cancel.

Sticker shock on subscriptions

The new prices that came with Copilot integration were substantial. The annual cost for a Microsoft 365 Personal plan skyrocketed from $109 to $159. This represents a sharp 45 percent increase for individual users.

The Family plan also saw a significant jump, rising from $139 to $179 per year. For many households, these increases added a noticeable amount to their annual software budget without any clear opportunity to opt out.

The Watchdog steps in

The Australian Competition and Consumer Commission, or ACCC, is the group taking legal action. They are the national agency responsible for ensuring fair trading and protecting consumer rights. Their investigation into Microsoft lasted for several months.

Following their findings, the ACCC has initiated proceedings in the Federal Court of Australia. They are alleging that Microsoft engaged in misleading and deceptive conduct against a huge portion of its user base.

Deliberately concealed option

The chair of the ACCC, Gina Cass-Gottlieb, made strong statements about the case. She publicly asserted that Microsoft deliberately omitted reference to the Classic plans in its communications. This suggests a conscious effort to keep users in the dark.

The accusation is that this was a strategic move to boost revenue from the more expensive Copilot-integrated plans. By concealing the cheaper alternative, Microsoft allegedly increased the number of people paying the higher fee.

The cancellation path discovery

So, how could a user actually find the hidden Classic plan? The path was not straightforward. Subscribers had to first navigate to their Microsoft account management page. Then, they needed to locate and select the Cancel subscription button.

It was only after proceeding through several cancellation confirmation screens that the option to switch to the Classic plan would appear. This design made it unlikely for the average user to ever find it.

Software you can’t live without

Applications like Word, Excel, and PowerPoint have become fundamental tools for modern life. Students, professionals, and families use them for everything from homework to managing household budgets. For many, there is no simple substitute.

This reliance made the threat of cancellation a powerful motivator. People felt they had no real choice but to pay the increased price to keep their essential software running.

Microsoft’s public response

When asked about the lawsuit, a Microsoft spokesperson provided a formal statement. They said that Consumer trust and transparency are top priorities for Microsoft. The company emphasized its commitment to legal and ethical standards.

Microsoft also confirmed it is carefully reviewing the ACCC’s detailed claims. They expressed an intention to work constructively with the regulator throughout the legal process.

A history with regulators

This is not Microsoft’s first encounter with regulatory scrutiny over its software bundling practices. In Europe, the company recently unbundled its Teams app from its Office 365 suite. This change came after an antitrust investigation.

That previous case was sparked by complaints from rivals, including Slack, who argued the bundling was anti-competitive. It shows a pattern of global concern regarding how Microsoft packages its products.

The AI add-on trend

Microsoft’s move to embed Copilot is part of a much larger industry shift. Tech companies everywhere are rapidly adding AI features to their existing software products. They often market these capabilities as major, must-have advancements.

This trend is leading to widespread price increases across many software-as-a-service platforms. Companies are betting that customers will pay a premium for the promise of artificial intelligence.

The ACCC’s core mission

The ACCC’s primary role is to enforce the Australian Consumer Law. This law prohibits businesses from engaging in misleading or deceptive conduct. It also requires them to provide accurate information about their services and prices.

The agency acts on behalf of the public to ensure a fair marketplace. Their goal is to hold even the largest corporations accountable for their practices.

Potential financial fallout

The potential penalties for breaching Australian consumer law are severe. For a corporation, the maximum fine can be the greater of $50 million, three times the value of the benefit gained, or 30% of its local turnover. The court will determine the final amount based on its findings.

Beyond the fine, the ACCC is also seeking consumer redress. This could mean Microsoft is forced to provide refunds or credits to the affected subscribers.

A lesson for all subscribers

This case serves as an important reminder for everyone with digital subscriptions. It is crucial to read all emails and notifications from your service providers carefully. Companies often communicate important changes about pricing and terms through these channels.

Do not simply click agree without understanding what you are accepting. Taking a moment to read the details can save you money and hassle.

Audit your own subscriptions

Take some time to review your own recurring payments for streaming, software, and other services. Check your bank and credit card statements for charges you might have forgotten. You may be surprised by what you find.

Look at the renewal dates and current prices for each service you actively use. This simple audit can help you cancel unused subscriptions and avoid unexpected price increases.

While you’re securing your subscriptions, don’t forget about your digital safety. Find out more about the latest ‘ClickFix’ threat that’s targeting users.

Your right to clear choices

As a consumer, you have the right to clear and honest information before you are charged. Businesses must be transparent about their options, especially when prices are increasing. They should not hide cheaper alternatives to manipulate your decision.

Staying informed and questioning changes are your best tools for navigating the digital marketplace. Your choices and your wallet have real power.

Curious about the future of the companies behind these tools? See what experts are saying about the long-term outlook for Microsoft and OpenAI.

Have a thought on this situation? Share your opinion in the comments below and hit the like button if you found this insightful.

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This slideshow was made with AI assistance and human editing.