Australia’s competition watchdog has filed a lawsuit against Microsoft, accusing the tech giant of misleading millions of users into paying more for its AI assistant, Copilot.

The Australian Competition and Consumer Commission (ACCC) announced Monday that it had taken legal action in the Federal Court against Microsoft Australia and its parent company, Microsoft Corp.

According to the regulator, Microsoft made “false or misleading” claims to about 2.7 million Australians subscribed to Microsoft 365 plans with automatic renewal.

The company allegedly implied that users faced two choices: either upgrade to new Microsoft 365 plans integrated with Copilot at a higher cost or cancel their subscriptions altogether.

However, the ACCC said a third, less obvious option existed allowing customers to remain on their existing “Classic” plans without Copilot at the original price.

This option reportedly became visible only after users initiated the cancellation process.

“Microsoft deliberately failed to mention the Classic plans in its communications and concealed their existence until after subscribers began to cancel,” said ACCC Chair Gina Cass-Gottlieb.

“This practice was designed to push more consumers toward the higher-priced Copilot plans.”

Cass-Gottlieb added that Microsoft Office applications included in 365 subscriptions are “essential in many people’s daily lives,” and that limited alternatives make cancellation a difficult choice for consumers.

The watchdog claims Microsoft has been misleading personal and family plan subscribers since October 31, 2024.

Annual subscriptions for Microsoft 365 plans incorporating Copilot were between 29 and 45 percent higher than those without, the watchdog said.

The commission is seeking penalties, injunctions, consumer redress, and costs.

Microsoft could face penalties of Aus$50 million or more (US$30 million) for each breach.

Microsoft did not immediately respond to AFP’s request for comment.