Microsoft Sued for Allegedly Forcing M365 Users to Pay for AI

Microsoft is facing legal action in Australia over claims it misled millions of customers into paying for its AI assistant, Copilot, by concealing a lower-priced, non-AI version of its Microsoft 365 subscription plans.

The Australian Competition and Consumer Commission (ACCC) alleges that approximately 2.7 million auto-renewing subscribers were told they had only two choices: accept a significant price increase tied to Copilot integration or cancel their subscription, when a third, AI-free “Classic” option was in fact available but hidden.

The ACCC filed its lawsuit against Microsoft Corporation and its Australian subsidiary in the Federal Court on 27 October 2025, following a months-long investigation. The watchdog claims that, starting 31 October 2024, Microsoft deliberately omitted any reference to the Classic plan in its official communications, steering users toward more expensive Copilot-integrated subscriptions. According to the ACCC, the Classic plan, identical to users’ existing service but without Copilot and without a price increase, could only be accessed by initiating the cancellation process through Microsoft’s online portal.

In October 2024, Microsoft began bundling its generative AI assistant, Copilot, into these plans, framing it as a major upgrade. Copilot can draft documents, summarize emails, analyze data, and automate routine tasks. The integration was accompanied by a price hike: the Personal plan rose 45% annually (from AUD 109 to AUD 159), and the Family plan increased 29% (from AUD 139 to AUD 179).

To inform users, Microsoft issued two emails and published a blog post stating that the new, AI-powered plans would apply at the next renewal unless the subscriber canceled. However, the ACCC alleges these messages misrepresented the situation by omitting the existence of the Classic option. It was only after selecting “Cancel subscription” and continuing through the cancellation flow that users were offered the ability to switch to the lower-priced, AI-free Classic plan, a design pattern the ACCC believes was intended to discourage its discovery.

“Microsoft’s communications presented the upgrade as mandatory,” the ACCC argues in court documents. “In reality, subscribers could retain their existing services without Copilot and without paying more—but this option was deliberately hidden.”

The legal filing outlines three allegedly false or misleading representations:

1. that users were required to accept AI features to continue their subscription (the “Copilot necessity” claim),
2. that the price increase was mandatory (the “price necessity” claim),
3. and that the only available choices were upgrading or canceling (the “false options” claim).

The ACCC states these representations breach multiple provisions of the Australian Consumer Law, including sections related to misleading conduct and omission of material information.

The ACCC is seeking penalties, consumer redress, injunctions, and declarations from the Court. Under Australian law, each breach could result in a maximum fine of AUD 50 million or more, depending on turnover and financial benefit obtained.

Subscribers who have not yet renewed since 8 July 2025 can still access the Classic plan by navigating to the subscription management page, selecting “Cancel subscription,” and following the process until the alternative appears.