By: Stephen Morrissey, Christy Mellifont, Katie Kyung and Klara Vrdoljak

Australian Competition and Consumer Commission v Microsoft Corporation & Anor

In this new series, WK’s Cyber Privacy & Technology team will provide updates on the latest developments in technology disputes.

This first edition concerns the issuing of proceedings in Australian Competition and Consumer Commission v Microsoft Corporation & Anor (Federal Court of Australia Proceedings No. NSD1977/2025).

The Proceeding

The Australian Competition and Consumer Commission (ACCC) commenced proceedings in the Federal Court of Australia against the Microsoft Corporation and its Australian subsidiary, Microsoft Pty Ltd (Microsoft AU) (together, Microsoft), alleging breaches of the Australian Consumer Law (ACL) in relation to the marketing and pricing of its Microsoft 365 Personal and Family subscriptions.

Background

In 2023, Microsoft launched ‘Copilot’, an AI-powered tool designed to help users with tasks such as drafting and editing documents, and data analysis.

On 31 October 2024, Microsoft announced that Copilot would be integrated into its Microsoft 365 Personal and Family subscriptions. Alongside this AI integration, Microsoft also introduced a price increase, raising the annual fee for Personal subscriptions from $109 to $159 and for Family subscriptions from $139 to $179, with monthly fees also rising accordingly.

The ACCC alleges that Microsoft told existing subscribers that they could either:

  1. accept a fee increase of 45% to maintain access to their subscriptions with AI integration; or
  2. cancel their subscriptions.

The ACCC says that Microsoft failed to make subscribers aware that there was an “undisclosed third option” (also known as the ‘Classic Option’) which would enable them to retain their subscription at the original price, without AI integration. This third option was only revealed to subscribers who initiated the cancellation process, which the ACCC claims was a deliberate attempt by Microsoft to prevent subscribers from opting out of the upgraded system, and to encourage them to take up its AI features at higher pricing.

The ACCC alleges that as a result of Microsoft’s conduct, approximately 2.7 million Australians were misled into paying higher prices for their Microsoft 365 Personal and Family subscriptions.

Key Allegations

In its Concise Statement filed on 27 October 2025, the ACCC alleges that Microsoft’s conduct was misleading or deceptive in contravention of s 18 and 29(1)(i), 29(1)(l), and 29(1)(m) of the ACL and may have resulted in subscribers paying more or accepted unwanted AI integration because they were unaware of their ability to retain their existing subscription at the original price.

A summary of Microsoft’s alleged misrepresentations is set out below:

The Copilot Necessity Representation

Microsoft represented to existing subscribers that they must accept AI integration to maintain subscription access, when in fact, subscribers could retain access to their subscription without AI integration (the Classic Option), which was not disclosed.

The Price Necessity Representation

Microsoft represented to subscribers that they had to pay a higher price to maintain subscription access, when in fact, the Classic Option allowed subscribers to keep their subscription at the original price, which was not disclosed.

The Options Representation

Microsoft represented to subscribers that they only had two options to choose from, when in fact, subscribers had the choice of retaining the Classic Option (without AI integration and at the original subscription price). The Classic Option was only revealed if a subscriber initiated the cancellation process.

Potential Implications – Watch this Space

This case is at a very early stage but the outcome could have significant implications for technology providers, as Microsoft’s integration of ‘Copilot’ is part of a wider industry trend to monetise AI through existing subscription bundles.

The case also demonstrates how regulators are using existing consumer protections to address the challenges presented by the digital environment, with a focus on enforcement. In a media release following commencement of proceedings, the ACCC noted that the maximum penalty for Microsoft’s alleged breaches is the greater of:

  • $50 million;
  • three times the total benefits that have been obtained and are reasonably attributable to the relevant conduct; or
  • if the total value of the benefits cannot be determined, 30% of the corporation’s adjusted turnover during the breach turnover period.

This case could have significant implications for the technology sector (and its insurers) including:

  • emphasising the need for transparency in subscription practices and product design upgrade paths (which are increasingly prevalent alongside the adoption of SaaS platforms);
  • reinforcing the importance of presenting clear and upfront choices to consumers, including communicating the value and cost of AI tools; and
  • demonstrating the ACCC’s increased regulatory scrutiny on digital subscription models and the marketing of technology products (and the corresponding exposures for technology providers).

Watch this space for developments that may inform expectations for technology providers operating in Australia.

Key Contacts & Updates

Wotton Kearney’s Technology Disputes Team uniquely combines expertise in insurance, technology and disputes to provide end-to-end support for insurers, technology providers, corporates and government entities.

As the only dedicated technology disputes practice in Australia, the team provides a full-service technology capability spanning regulatory risks and investigations, recoveries, disputes and third-party claims under one roof.

For more information, please contact:

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