In October 2025 the ACCC sued Microsoft, alleging it misled about 2.7 million Australian Microsoft 365 Personal and Family subscribers. When Copilot was added and prices rose (Personal from A$109 to A$159 a year), Microsoft allegedly told auto-renewing customers to accept the rise or cancel, without clearly mentioning a cheaper Classic plan without Copilot. The case is before the Federal Court.
Key takeaways
- Microsoft 365 Personal rose 45% (A$109 to A$159 a year) and Family 29% (A$139 to A$179) when Copilot was added.
- The ACCC alleges subscribers were told to accept the rise or cancel. The cheaper Classic plan allegedly only appeared partway through cancelling.
- Microsoft apologized in November 2025 and offered affected customers the option to switch to Classic with a refund.
- The lesson: when you raise prices, tell customers every option, including any cheaper plan.
Here's the timeline of one Microsoft 365 subscriber, as the ACCC tells it.
19 April 2024. They buy a Microsoft 365 Personal plan for A$109 a year, with auto-renewal on.
31 October 2024. Microsoft posts a blog announcing price rises for existing subscribers at renewal.
9 January 2025. An email arrives: Copilot is coming, and the price is going to A$159.
13 April 2025. A second email, seven days before renewal.
19 April 2025. They're renewed at A$159.
They never knew there was a third option. A "Classic" plan, with everything they already had except Copilot, at the old price.
What did Microsoft change?
In January 2025, Microsoft rolled its Copilot AI assistant into consumer Microsoft 365 plans worldwide and raised prices. In Australia:
| Plan | Before | After | Rise |
|---|---|---|---|
| Microsoft 365 Personal (annual) | A$109 | A$159 | 45% |
| Microsoft 365 Family (annual) | A$139 | A$179 | 29% |
On its own, that's a normal business decision. Add a valuable new feature, charge more for it.
What does the ACCC allege?
That the problem was what Microsoft didn't say.
On 27 October 2025 the ACCC sued Microsoft Australia and Microsoft Corporation in the Federal Court, alleging they misled about 2.7 million Australian subscribers. The ACCC alleges:
- from 31 October 2024, auto-renewing Personal and Family subscribers were told they had two options: accept Copilot and the higher price, or cancel;
- Microsoft's two emails and blog post didn't mention the Classic plan;
- subscribers could only find Classic by starting to cancel: opening their subscriptions, selecting cancel, and continuing until a later screen offered it.
ACCC Chair Gina Cass-Gottlieb said Microsoft "deliberately omitted reference to the Classic plans in its communications." The ACCC said consumer reports and online forum discussions helped it find the Classic plan in the cancellation flow.
The case covers home plans only, not business or enterprise subscriptions. These are allegations the court hasn't yet decided.
What has happened since?
About a week after the case was filed, Microsoft apologized. It said it "could have communicated more clearly when we changed our pricing in October 2024," and: "We fell short of our standards here, and we apologise." It offered affected customers the choice of keeping their current plan or switching to a Classic plan with a refund.
The ACCC is seeking penalties, injunctions, declarations and consumer redress. Its release set the maximum penalty per breach at the greatest of A$50 million, three times the benefit obtained, or 30% of adjusted turnover during the breach period. For conduct from 28 March 2026, that headline figure has doubled to A$100 million (see Australia's subscription trap laws for the current penalties).
As at October 2026, the case was still before the court.
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Why does this matter if you're not Microsoft?
Because the strategy Microsoft used is one every software and subscription business is now using.
In The Subscription Playbook I used Microsoft Office as an example of marginal profitability. Once the software was built, each extra cloud subscription cost Microsoft next to nothing. Almost all gross profit.
AI breaks that. Every Copilot query costs money to run. So it's no surprise companies are lifting prices to cover it. Canva did it with Teams (how Canva raised team prices 300%). Slack did it inside Salesforce (how Slack put AI in the box). Xero is doing it now.
None of that is the issue. The issue, as alleged, is giving customers a false choice. "Pay more or leave" when the real choice was "pay more, leave, or keep what you have."
My take
I'd go further than the law requires. If you've got a cheaper option, put it in the price-rise email, in plain words. Some customers will take it. Fine. They'd have cancelled otherwise, or worse, renewed angry and told everyone. A customer who downgrades is still a customer. A customer who feels tricked is a future complaint.
What should a price-rise email include?
Here's the short checklist I'd use for any subscription price change, in Australia or anywhere else:
- The new price and the date it starts, in the first two lines.
- Why it's changing, honestly. New features, higher costs, or both.
- Every option the customer has: accept, move to a cheaper or legacy plan, or cancel, with a link to each.
- How to cancel, in plain words, without making them hunt.
- Enough time to decide. For annual plans, well before renewal, not a week before.
If any of those is missing, fix it before you hit send.
What can you steal from Microsoft's mistake?
- Tell existing customers every option when you raise prices, including staying on an old plan if one exists.
- Send notice well before renewal, with a clear "keep, change or cancel" choice. Microsoft's second email went seven days before renewal.
- Don't rely on auto-renewal to carry a price rise. Get active acceptance where you can, especially for big rises.
- Make the downgrade path visible, not hidden in the cancellation flow.
- Check your AI costs before you set the new price. The AI gross margin guide shows how.
When you're ready to write the notice, use our price increase email templates, and read raising subscription prices in Australia and the automatic renewals guide. For the regulator's wider priorities, see what the ACCC expects from subscription businesses.
What to do next
Before your next price rise, model the churn you can afford, then write the email listing every option.
Price Increase SimulatorModel the MRR impact of a price rise and your break-even churn.Open the free tool →Then check the rest of your flow against the rules that start on 1 July 2027.
AU Subscription Compliance CheckerCheck your sign-up and cancellation flow against the new Australian rules.Open the free tool →Frequently asked questions
What is the Microsoft 365 Classic plan?
According to the ACCC, Classic plans kept the existing features of Microsoft 365 Personal and Family, without Copilot, at the previous price. The ACCC alleges subscribers could only find the option by starting to cancel, opening their subscriptions, selecting cancel and continuing, when a later screen offered Classic. Microsoft controls which plans and prices are available.
Has the court decided the Microsoft case?
As at October 2026, I couldn't find a court decision. The ACCC's claims are allegations that the Federal Court has yet to determine. The ACCC is seeking penalties, injunctions, declarations, consumer redress and costs. Microsoft has apologized for how it communicated the change and offered refunds to eligible customers who switch to a Classic plan.
Do I have to offer existing customers their old plan when I raise prices?
There's no general rule in Australia that you must keep an old plan. But if a cheaper option exists, the ACCC's case suggests that leaving it out of your price-rise message, while telling customers to accept or cancel, risks misleading them. If you do keep a legacy plan, say so clearly.
Do business Microsoft 365 plans fall under this case?
No. The ACCC's case covers consumer home plans, Microsoft 365 Personal and Family, not business or enterprise subscriptions. That said, the principle that customers should be told their real options applies to any business, and the 2027 subscription rules extend some protections to small business customers.
Talk it through with a BPAG adviser
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Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- ACCC, Microsoft in court for allegedly misleading millions of Australians over Microsoft 365 subscriptions (27 Oct 2025)
- Reuters, Australia sues Microsoft over AI-linked subscription price hikes (27 Oct 2025)
- CRN Australia, Microsoft Australia apologises for its misleading pricing on M365 subscriptions (7 Nov 2025)
- Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 (No. 64, 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.