Microsoft has apologised to millions of Australian customers after admitting it failed to clearly communicate subscription options when introducing AI features into its Microsoft 365 Personal and Family plans. The apology follows mounting scrutiny and a Federal Court lawsuit filed by the Australian Competition and Consumer Commission (ACCC), which alleges the company misled about 2.7 million users when it bundled AI capabilities with higher subscription fees.
In a statement and email sent to subscribers on Thursday, Microsoft said it began reaching out to customers in Australia to address confusion that arose from its October 2024 pricing changes. The technology giant said the shift stemmed from strong demand for AI tools but conceded that it “could have been clearer” about non-AI subscription alternatives.
“Today we began reaching out to our Microsoft 365 Personal and Family subscribers in Australia regarding a subscription alternative that we could have communicated more clearly when we changed our pricing in October 2024,” Microsoft said.
“In response to the demand for advanced AI tools, we introduced AI capabilities into the Microsoft 365 Personal and Family subscriptions that we offer in Australia. In hindsight, we could have been clearer about the availability of a non-AI enabled offering with subscribers, not just to those who opted to cancel their subscription.”
Company admits falling short of transparency standards
Microsoft said it “fell short of our standards” and apologised for the confusion caused to subscribers. The company reiterated its long-standing presence in Australia, where it has operated for more than 40 years, underscoring that its business is built on “trust and transparency.”
“We fell short of our standards here, and we apologise,” the statement said. “We will learn from this and improve.”
In its correspondence, the company expressed regret for the lack of clarity around pricing and subscription options, saying it has now shared details about lower-priced alternatives that come without AI and is offering refunds to eligible subscribers who wish to switch.
Microsoft outlines two subscription choices
In its customer email titled “Your Microsoft 365 Options,” Microsoft explained that Australian users have two choices going forward:
Option 1: Stay on Microsoft 365 Personal or Family (AI-enabled)
This current plan includes the core Microsoft 365 apps, the Copilot AI assistant, and ongoing feature updates. Prices are set at AU$16 per month for Personal or AU$18 per month for Family, tax inclusive.
Option 2: Switch to Microsoft 365 Personal or Family Classic (non-AI)
The Classic version includes standard Microsoft 365 apps and regular security updates but excludes the Copilot AI assistant and new feature rollouts. Pricing remains at AU$11 per month for Personal or AU$14 per month for Family, matching the previous rates before last year’s price changes.
Subscribers who switch to the Classic plan by 31 December 2025 will receive a refund for the price difference backdated to their first renewal after 30 November 2024. Refunds will be processed within 30 days and reflected in users’ Microsoft accounts.
“This refund option is only available to subscribers in Australia who receive this email and switch to the Microsoft 365 [Personal/Family] Classic plan by 31 December 2025,” the company said.
Regulatory scrutiny and allegations from the ACCC
The ACCC has accused Microsoft of misleading consumers by failing to make the cheaper “Classic” plans easily discoverable when AI features were introduced. According to the watchdog’s filing, these non-AI plans could have saved subscribers between AU$40 and AU$50 annually, allowing them to keep identical core services at the old price point.
Microsoft’s apology comes just 10 days after the ACCC launched legal proceedings, alleging the company’s communications effectively pushed users toward costlier plans that included features they may not have wanted.
The competition regulator is seeking penalties, injunctions, declarations, and consumer redress, arguing that the tech firm breached Australian consumer law by omitting critical price alternatives during its October 2024 rollout.
Industry reactions and lessons for AI-based pricing
Technology and legal experts say Microsoft’s experience underscores the importance of transparency in the rollout of AI-driven services.
“Companies should explicitly separate AI and non-AI pricing tiers at launch, as well as state the pros and cons of each to allow consumers to make more informed decisions,” said Joni Pirovich, founder and CEO of Crystal aOS.
While Microsoft’s apology and refund program mark an effort to rebuild goodwill with Australian users, the company still faces regulatory hurdles as the court case moves forward. The incident serves as a reminder that the rapid integration of AI services into consumer products must be accompanied by clear communication and choice.
Oleksii Shumak
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