Microsoft has apologised to customers and said it will refund them, after the consumer watchdog alleged the tech giant misled about 2.7 million Australians over subscription costs so they would remain on more expensive plans.
The company wrote to customers on Thursday to apologise to those affected, saying it "fell short of our standards" and could have "communicated more clearly when we changed our pricing in October 2024".
Last week, the Australian Competition and Consumer Commission (ACCC) sued the tech giant for allegedly misleading Australians over its Microsoft 365 subscriptions.
"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," the company said on Thursday.
"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.
"In our email to subscribers, we expressed our 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."
Announcing the court action last week, the consumer watchdog slammed Microsoft for the conduct, alleging it "deliberately hid" a subscription option from Australian customers and said it would be seeking a penalty that would deter similar behaviour from other firms.
Customers have two options: to stay on the Microsoft plan with Copilot features at the increased price, or to switch back to the "Classic" plan, which the company says "does not include our AI assistant Copilot and may not receive new feature updates".
Microsoft said subscribers who opted to switch back to the cheaper plans before the end of 2025 would, within 30 days, receive refunds dating back to payments made after November 30, 2024.
ACCC chair Gina Cass-Gottlieb welcomed the update from Microsoft, but noted the offer to customers did not come as a result of a settlement with the regulator.
"We continue to seek penalties, injunctions, declarations, effective consumer redress, and costs in court,"
she said.
"As the matter is before the court we will not be providing further comment."
Microsoft has come under fire for hiking its subscription prices. (AP)
How the ACCC alleges Microsoft misled customers
Following the integration of Microsoft's AI feature, Copilot, the company increased the annual subscription price of its Microsoft 365 personal plan by 45 per cent from $109 to $159.
The annual subscription price for the Microsoft 365 family plan increased by 29 per cent from $139 to $179.
The ACCC alleged that since October 31, 2024, Microsoft had told these subscribers 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".
This information was false or misleading, the ACCC alleges, 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.
Microsoft sent two emails and published a blog post to inform auto-renewing subscribers — as of October 31, 2024 — about the Copilot integration and the impending price increase that would apply at their next renewal.
The ACCC's case against Microsoft centres around those three pieces of communication the company had with its customers.
"We allege that Microsoft's two emails to existing subscribers and the blog post were false or misleading as they conveyed that consumers had to accept the more expensive Copilot-integrated plans, and that the only other option was to cancel," ACCC chair Gina Cass-Gottlieb said when announcing the legal action on October 27.
"All businesses need to provide accurate information about their services and prices. Failure to do so risks breaching the Australian consumer law."
In its message to customers on Thursday, Microsoft said it did not act in a trustworthy and transparent manner.
"We have been present in Australia for more than 40 years, operating on the principles of trust and transparency. We fell short of our standards here, and we apologise. We will learn from this and improve,"
the company said.
The US-based tech giant could face multi-million-dollar penalties if the court finds in the ACCC's favour.
The tech giant faced backlash from customers who did not want to pay for Copilot. (Reuters: Dado Ruvic/Illustration)
Microsoft sends some customers the wrong link to process refunds
After the announcement, several customers on family subscriptions contacted ABC News to report that they were taken to the wrong link when they tried to revert back to the Classic family plan and get a refund.
Microsoft had to then send them a new, correct, link.
"I received one of the emails from Microsoft saying I could opt back to the lower-priced family plan, but when I clicked on the link they provided, it took me to an option for an individual plan with no choice to choose anything else," Dianne Abbott said.
She said she emailed Microsoft about it after she tried to switch back at just before 7:30am, and it did not work.
The company then sent another email at around 10:48am with the right link.
"I do find it interesting that such a big tech company sends an email with the wrong link,"
she said.
She is also worried by the wording of Microsoft's statement, which suggests she may miss out on certain upgrades by reverting to the Classic plan.
"I don't want the new AI features, so it's fair enough that I am not getting that, but if it's an update, that's a big issue," she said.
Microsoft customers experienced some issues trying to change subscriptions on Thursday. (Supplied)
Trevor Kinsey said he received an email on Wednesday that advised he could roll back to 365 Family Classic, but the linked page only had options for 365 Family or 365 Personal Classic.
"At around 12:15pm I opened a chat page with Microsoft to change my subscription and it told me I was 1,288 in line, so I declined for that to happen,"
he said.
"I've reported this [to the] ACCC. I wanted them to be aware that even when you respond in the way Microsoft wants you to respond, you still can't get the cheaper rate."
Greg Watson said he was "very disappointed this morning to find out a refund was not available, when it was clear it should be".
"I think Microsoft are just making the refund process as hard as possible," he said.
Kristie Millar told the ABC: "Microsoft staff must have had a really bad day with call and chat volumes — the fact that I sat in the chat queue for 5 hours, and from the way the queue was moving, had another five to go. Microsoft really took their time in correcting the issue with the email they sent."
A spokesman for Microsoft told ABC News: "Some subscribers eligible for the refund received an incorrect link. We apologise for the inconvenience and are sending them new emails with the correct link."