How Copilot AI landed Microsoft in trouble: Australian watchdog files lawsuit

Australia's competition authority has initiated legal proceedings against Microsoft, alleging that the tech behemoth misled consumers regarding pricing for Microsoft 365 subscriptions featuring its AI assistant, Copilot. The Australian Competition and Consumer Commission (ACCC) claims that starting in October 2024, Microsoft deceived approximately 2.7 million Australian customers into believing they needed to upgrade to more expensive personal and family plans that included Copilot. The ACCC highlighted that the annual cost of the Microsoft 365 Personal plan surged by 45%, increasing from A$109 to A$159 ($103.32), while the Family plan saw a 29% hike from A$139 to A$179. The regulatory body asserts that Microsoft failed to adequately inform consumers about a lower-priced “classic” version of Microsoft 365, which does not come with Copilot. Instead, customers were only made aware of this alternative when they attempted to cancel their subscriptions, a tactic the ACCC argues contravenes Australian consumer law. “The lack of critical information and the limited presentation of options led to a misleading impression about what was available,” stated the ACCC. The commission is pursuing financial penalties, consumer compensation, injunctions, and legal costs from both Microsoft Australia Pty Ltd and its parent company, Microsoft Corp. Under Australian legislation, companies found guilty of misleading practices could face fines of up to A$50 million, three times the benefit gained, or 30% of adjusted turnover during the infringement period if the benefit is unquantifiable. The ACCC noted that any penalties would ultimately be determined by the court, which will assess the situation based on the findings. Reports indicate that a complaint was filed with the ACCC earlier this year by a consumer regarding Microsoft's pricing adjustments. Many users expressed their dissatisfaction on online platforms following the price increases. Additionally, the ACCC is seeking compensation for subscribers of personal and family plans who were impacted by these alleged practices. Microsoft communicated the Copilot integration and associated price changes to auto-renewing subscribers through two email notices and a blog post, which were sent out on October 31, 2024, according to the ACCC. These communications are pivotal to the ongoing case. As of now, Microsoft has not publicly addressed the lawsuit. This case represents a significant regulatory challenge regarding the incorporation of AI functionalities into widely used consumer software in Australia.