Microsoft is seeking to defuse tensions with Australian regulators after being accused of misleading millions of customers over subscription pricing.
The company has expressed regret over its handling of Microsoft 365 renewals and has begun issuing refunds and apology emails, in a move that could shape the outcome of an ongoing legal dispute with Canberra’s competition watchdog.
The Australian Competition and Consumer Commission (ACCC) last week filed a lawsuit against Microsoft, alleging that the tech giant misled about 2.7 million Australian users by steering them toward more expensive Microsoft 365 plans bundled with its AI assistant, Copilot. The regulator claimed the company failed to clearly communicate the existence of cheaper, non-AI versions of the same services.
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In response, Microsoft has begun sending apology messages to millions of Australian subscribers, acknowledging that it “could have been clearer” about the availability of cheaper alternatives. The emails are being sent to customers who renewed Microsoft 365 Personal and Family plans in 2024 without being informed about the lower-cost options.
“In hindsight, we could have been clearer about the availability of a non-AI-enabled offering with subscribers, not just to those who opted to cancel their subscription,” Microsoft said.
The company has now offered refunds to subscribers who paid for the more expensive AI-enabled plans after November 2024. These customers can choose to remain on their current plan, which includes Copilot, or downgrade to the Microsoft 365 Personal or Family Classic options and receive compensation for the difference.
The ACCC’s lawsuit alleges that Microsoft effectively cornered users into upgrading by giving them limited choices at renewal. When subscribers attempted to cancel, the company offered what appeared to be a middle ground—keeping their old plan under a new name, but at the same higher rate. According to the regulator, this strategy violated Australia’s consumer protection laws by creating the impression that cheaper plans were unavailable.
In its statement, Microsoft said it has operated in Australia “with trust and transparency for more than 40 years” and admitted it fell short of those standards in this instance.
The ACCC’s Chair, Gina Cass-Gottlieb, stated that the regulator is reviewing Microsoft’s remediation efforts but stressed that the case will continue until a formal resolution is reached. If found guilty, Microsoft could face a fine of up to 30 percent of its annual turnover during the period of the violation, one of the harshest penalties available under Australian consumer law.
The case is the latest example of global regulators tightening scrutiny on tech firms’ business practices amid the rapid commercialization of artificial intelligence. Similar investigations have been launched in the European Union and the United States over AI-related pricing, transparency, and consumer consent.
Microsoft’s efforts to resolve the issue suggest an attempt to contain the damage before it escalates further. However, it is believed that even if the company avoids a financial penalty, the episode underscores the growing regulatory skepticism toward bundling AI features into core software products—particularly when doing so leads to higher costs for consumers without clear disclosure.