Australia’s competition watchdog has sued Microsoft Corp. over the way the company rolled out artificial intelligence features to its productivity suite.

The Australian Competition and Consumer Commission, or ACCC, filed the complaint today.

The lawsuit focuses on the Personal and Family editions of Microsoft 365. The two plans include the Office application bundle and certain other services such as Microsoft Teams, but lack the administrative controls available in the business versions. Consumers can configure their subscriptions to renew automatically.

The ACCC alleges that Microsoft misled 2.7 million Australian consumers who have automatically renewing  Microsoft 365 Personal and Family subscriptions. Last year, the company rolled out its Copilot AI assistant to the two plans and raised their prices. The ACC says Microsoft didn’t inform consumers they could avoid the price hike by switching to plans without Copilot.

“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,” said ACCC Chair Gina Cass-Gottlieb.

After it released Copilot to Microsoft 365, the company raised the price of the Personal and Family plans by 45% and 29%, respectively. It subsequently sent customers an email informing them of the change. The message stated that it’s possible to “cancel any time to stop future charges or change how you pay by managing your subscription in your Microsoft account.”

According to ACCC, the email wasn’t transparent enough about the fact that users could continue using Microsoft 365 without paying more. The watchdog raised the same issue in connection with a different email Microsoft sent to consumers and an accompanying blog post.

Microsoft 365’s subscription switching workflow is another focus of the lawsuit. The company offers Classic versions of the Microsoft 365 Personal and Family plans that don’t include Copilot and cost less than the standard subscriptions. According to the ACCC, consumers could only access the Classic versions by starting the subscription cancellation process. That involved navigating to Microsoft’s account management portal and clicking a “Cancel subscription” button.

If the company is found to have breached competition laws, it could be fined up to 30% of the adjusted turnover it generated during the relevant time period. The court could also order Microsoft to change its business practices.

“Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC’s claim in detail,” Microsoft said in a statement. “We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards.”

The lawsuit doesn’t mark the first time that Microsoft 365 has come under regulatory scrutiny. Last year, the European Union found that Microsoft had breached the bloc’s antitrust rules by bundling Teams with the productivity suite. In response, the company launched subscription plans that don’t include Teams and made a set of antitrust commitments. 

Photo: Microsoft