Microsoft Offers Refunds to 2.7 Million Australians After AI Pricing Fallout

Microsoft Faces Backlash Over Copilot Integration

Microsoft has apologized to roughly 2.7 million Australian users of its Microsoft 365 Personal and Family plans for mishandling the rollout of its AI-powered Copilot feature. The company admitted it failed to clearly communicate pricing and plan options, pledging to offer refunds to customers who switch to the more affordable “Classic” plan without AI features. The apology follows legal action from the Australian Competition and Consumer Commission (ACCC), which accuses Microsoft of misleading consumers about available subscription choices.

ACCC Takes Legal Action Against Microsoft

The ACCC filed a lawsuit in Australia’s Federal Court, claiming that Microsoft bundled its Copilot AI assistant into 365 plans and increased subscription prices without properly informing users. The annual cost for Personal plans reportedly rose by up to 45 percent—from A$109 to A$159—while Family plans increased by 29 percent—from A$139 to A$179.

The regulator alleges that Microsoft failed to disclose that a cheaper, non-AI “Classic” version of the plan remained available. Instead, users only learned about the alternative when they attempted to cancel their subscriptions.

Refund Options and Company Response

In an apology email sent to subscribers, Microsoft acknowledged it “fell short of our standards” in explaining the pricing changes. Eligible users now have two options:

• Stay on the AI-enhanced plan at the current price.
• Switch to the Classic plan and receive a refund for the difference in cost, dating back to their first renewal after November 30, 2024.

Customers must make their selection by December 31, 2025, to qualify for a refund. Microsoft emphasized its continued commitment to transparency and customer trust in Australia.

Broader Implications for AI and Consumer Law

Consumer advocates argue that this case underscores a growing challenge for tech companies worldwide as they integrate AI into long-standing services. The ACCC highlighted that millions of users rely on Microsoft’s software for essential work and education, which increases the importance of transparent communication under consumer protection laws.

If the court finds Microsoft in violation of Australian consumer law, the company could face fines exceeding A$50 million per offense. While Microsoft’s apology and refund initiative may help mitigate regulatory pressure, the case sets a precedent for how companies should disclose AI-related price changes.

This episode serves as a warning to other technology providers: when AI features are bundled into existing services, clear disclosure and customer choice must remain top priorities.