Microsoft Faces $30 Million Per Breach Penalty in Australia Over Misleading Copilot Subscription Practices

Microsoft could potentially incur penalties exceeding AUS$50 million (US$30 million) for each violation identified by Australian authorities.

Australia's competition regulator has launched legal proceedings against Microsoft, alleging the technology giant misled millions of Australians regarding subscription options for its AI assistant Copilot.

The Australian Competition and Consumer Commission (ACCC) has initiated a lawsuit in the Federal Court targeting both Microsoft Australia and its parent company Microsoft Corp.

According to the regulator, Microsoft made "false or misleading" representations to approximately 2.7 million Australian subscribers who have auto-renewal arrangements for Microsoft 365 plans, which provide access to various Office services online.

The ACCC claims Microsoft informed customers they faced only two choices: either upgrade to more expensive Microsoft 365 services with Copilot integration or terminate their subscriptions completely.

However, the watchdog alleges a third option existed but was deliberately obscured—continuing with existing "Classic" plans without Copilot at the original price point. This alternative reportedly only became visible when users initiated the cancellation process.

ACCC chair Gina Cass-Gottlieb stated, "Microsoft deliberately omitted reference to the Classic plans in its communications and concealed their existence until after subscribers initiated the cancellation process to increase the number of consumers on more expensive Copilot-integrated plans."

"The Microsoft Office apps included in 365 subscriptions are essential in many people's lives and given there are limited substitutes to the bundled package, cancelling the subscription is a decision many would not make lightly."

The commission alleges Microsoft has been misleading subscribers on personal and family plans since October 31, 2024.

According to the ACCC, annual subscriptions for Microsoft 365 plans incorporating Copilot were priced between 29 and 45 percent higher than equivalent packages without the AI assistant.

The regulator is pursuing penalties, injunctions, consumer redress, and costs against the company.

For each breach identified, Microsoft could face financial penalties of AUS$50 million (US$30 million) or more.

As of the filing, Microsoft had not provided an immediate response to requests for comment on the allegations.