Microsoft Offers Refunds to Australian Customers Following AI Price Hike Controversy

Microsoft has issued a formal apology to Australian customers following significant backlash regarding its pricing strategy. In an email sent on Thursday, the technology corporation announced it would provide refunds to Microsoft 365 Personal and Family subscribers who paid increased costs for artificial intelligence tools.

The controversy stems from Microsoft's October 2024 price increases. After integrating its AI feature Copilot into Microsoft 365 subscriptions, the company raised the personal plan price by 45 percent, from $109 to $159 annually. Similarly, the Microsoft 365 family plan experienced a 29 percent increase, jumping from $139 to $179 per year, according to ABC.

In its communication, Microsoft expressed regret for "not being clearer about our subscription options, shared details about lower-priced alternatives that come without AI and offered a refund to eligible subscribers who wish to switch." The company apologized for "falling short" of its standards regarding trust and transparency principles.

Approximately 2.7 million Australians qualify for refunds, as reported by The Guardian. Affected customers can receive refunds if they opt to switch to cheaper plans before the end of 2025. These subscribers would receive reimbursements within 30 days, retroactively covering payments made after November 30, 2024.

Consumers now have two options: remain on the Microsoft plan featuring Copilot capabilities at the higher price point, or revert to the "Classic" plan, which excludes the AI assistant Copilot and "may not receive new feature updates".

This apology follows legal action initiated by the Australian Competition and Consumer Commission (ACCC) against Microsoft in federal court. The ACCC alleged that the company misled consumers regarding the availability of less expensive plans without AI tools and about subscription pricing. According to the ACCC, Microsoft failed to inform customers about cheaper alternatives, only revealing non-AI options when customers attempted to cancel their services.

Microsoft reportedly informed customers with auto-renewal subscriptions that to maintain their service, they "must accept the integration of Copilot and pay higher prices for their plan, or, alternatively, cancel their subscription," ABC reported.

While Microsoft faces millions in refund payments, the company could incur more significant financial consequences if the ACCC lawsuit succeeds. Maximum penalties for companies found guilty of anti-competitive practices could reach a $50 million fine, 30 percent of the company's adjusted turnover during the violation period, or triple the value of the misleading conduct.