Microsoft faces possible A$50m penalty in Australia, ticking-off letter in New Zealand

An option for Microsoft 365 personal and family plan subscribers to say no to the addition of Copilot artificial intelligence assistant and attendant price hikes were not revealed unless they clicked the option to cancel their subscription. Photo / Getty Images

Microsoft has been taken to federal court by Australia’s market regulator, which alleges millions of customers were misled by a price increase tied to the tech giant’s Copilot artificial intelligence assistant.

Kiwi consumers received the same offer. But a “very disappointed” Consumer NZ says the tech giant was let off with a warning letter on this side of the Tasman, with no follow-up investigation after it lodged a formal complaint.

The Australian Competition and Consumer Commission (ACCC) alleges that since October 31, 2024, Microsoft has told subscribers of Microsoft 365 Personal and Family plans with auto-renewal enabled that to maintain their subscription, they must accept the integration of Copilot and pay higher prices for their plan, or, alternatively, cancel their subscription.

The ACCC alleges this information provided to subscribers was false or misleading because there was an undisclosed third option, the Microsoft 365 Personal or Family Classic plans, which allowed subscribers to retain the features of their existing plan, without Copilot, at the previous lower price.

If found guilty, Microsoft faces a fine of up to A$50 million ($56.9m) or three times the total benefits of its breach (whichever is greater). If the benefits can’t be calculated, the penalty is 30% of its revenue during the breach period (Microsoft Australia’s revenue was A$9.23 billion for the year to June 30, 2025).

Consumer NZ said it was the same situation for New Zealand users of Microsoft 365 Personal and Family plans.

The Herald found it to be the case when an option to stay on a Family plan at the same price – that is, avoiding a 28% price increase from $179 to $229 for the addition of Copilot – was only revealed upon hitting the option to cancel a subscription.

It was the same situation for a Personal Microsoft 365 subscription, the price of which increased by 38% ($129 to $179) with the addition of Copilot, with the option to stay on the old pricing only revealed if the customer chose to cancel.

‘Very Disappointed’

In the New Year, Consumer NZ complained to the Commerce Commission, asking it to investigate.

This morning, a spokeswoman for Consumer NZ provided this update:

“Back in January, we complained to the Commerce Commission about Microsoft 365’s price increases.

“Following that complaint, the commission told us it had provided Microsoft NZ with a letter, advising Microsoft NZ of complaints received and reminding it of its obligations under the Fair Trading Act.

“The commission said it did not intend to investigate further at that stage.

“We were very disappointed by the commission’s response and we would love to see the commission taking a bolder stance, like the ACCC, when it comes to matters like this.

“Unfortunately, Consumer is still getting reports from people telling us they’re being affected.”

A Commerce Commission spokeswoman said the regulator would only supply a copy of the warning letter to Microsoft without an Official Information Act request (for which it is given up to 20 working days to respond).

Microsoft told the ABC on Monday that the company was reviewing the ACCC’s claim in detail.

“Consumer trust and transparency are top priorities for Microsoft,” it said.

A spokesman for Microsoft Australia-New Zealand did not directly answer a question on whether the company had changed the way it presented pricing options for its 365 plans.

He forwarded a link to a Microsoft blog post from January 16 – toward the end of which there is mention of the option to stay on a “Classic Plan” with no Copilot and no price increase.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.