‘Slam dunk’: Microsoft sued for misleading Aussie users
Alex Mitchell and Farid Farid |
Software giant Microsoft is facing hefty penalties for allegedly misleading millions of Australian users over artificial intelligence-linked subscription price hikes.
The nation’s consumer watchdog has taken the US company to court for allegedly misleading customers into believing they must either pay extra fees when its AI assistant Copilot is integrated into their package or cancel altogether.
But subscribers also had the option to maintain their previous plan with the AI assistant at the same price, according to the Australian Competition and Consumer Commission, as stated in the Federal Court case.
Some 2.7 million Australians received the emails, which said a Microsoft 365 personal account would auto-renew at $159 for a one-year subscription if the customer did not cancel.
Commission chair Gina Cass-Gottlieb said a consumer would not have been aware that switching to a separate “classic” plan, with the existing product and at the same price, was an option.
“We see this as very serious conduct,” she told reporters on Monday, adding the consumer watchdog would seek compensation for customers and penalties from the company.
The watchdog alleged Microsoft deliberately omitted references to the plan to increase the number of customers moving to the more expensive option.
“You will be charged the new price unless you cancel or turn off recurring billing,” the email read.
A second email, which did refer to the classic plan, was sent seven days before the auto-renewal date.
Ms Cass-Gottlieb said the commission would seek a hefty penalty aimed at deterring Microsoft and to send a severe warning to other companies beyond the tech sector.
“We see this as affecting a very significant number of Australian consumers, as being the action by a very major corporation … in respect of services that are vital for the operation of families in Australian homes,” she said.
A Microsoft spokesperson said consumer trust and transparency were top priorities for the company and it was reviewing the consumer watchdog’s claim in detail.
“We remain committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards,” they said.
One Consumer Policy Research Centre survey found almost a third of Australian consumers felt pressured into keeping a subscription they wanted to cancel.
“Australians deserve to know what they’re paying for and not be locked-in to pay for what they didn’t need or want,” the centre’s deputy chief Chandni Gupta told AAP.
“Not genuinely offering choice is not coincidence, it’s deliberate deception by design.”
University of Sydney business law professor Luke Nottage said the consumer watchdog appeared to have a “slam dunk” case against Microsoft.
“I don’t understand why Microsoft just doesn’t concede on this one, because it’s pretty clearly misleading towards consumers under the Australian Consumer Law,” he said.
Dr Nottage noted the commission was trying to use misleading conduct prohibitions to clamp down on auto-renewals generally, pointing to another case against dating website eHarmony based on hundreds of complaints about memberships.
Microsoft 365 provides access to the tech giant’s Office products including Word, Excel and PowerPoint, and services such as Outlook and Teams.
The 365 product including Copilot for a personal account jumped from $109 to $159, while access to a family plan increased from $139 to $179.
Maximum penalties for breaches of consumer law include a $50 million fine, three times the benefits a company obtained from misleading practice or 30 per cent of the corporation’s adjusted turnover during the breach period.
AAP
