Dive Brief:
- The Australian Competition and Consumer Commission sued Microsoft on Monday, claiming the tech giant misled 2.7 million Australian customers about price increases resulting from the integration of its AI assistant, Copilot, into Microsoft 365 plans.
- Microsoft told subscribers of the Microsoft 365 Personal and Family plans that, in order to maintain their subscriptions, they had to accept Copilot’s integration and subsequently pay higher plan prices, the suit alleges. The commission said Microsoft misled users by failing to communicate the existence of an alternate “Classic” plan that allowed customers to retain subscriptions at the lower price point without Copilot.
- “Following a detailed investigation, we will allege in court that Microsoft deliberately omitted reference to the Classic plans in its communications and concealed their existence until after subscribers initiated the cancellation process to increase the number of consumers on more expensive Copilot-integrated plans,” ACCC Chair Gina Cass-Gottlieb said in a release about the lawsuit.
Dive Insight:
Microsoft’s move to bundle Copilot into existing subscription plans and raise prices reflects an ongoing trend from vendors to bolt AI capabilities onto their products.
IT leaders are partly blaming rising software costs on new AI capabilities. More than 4 in 5 technology leaders believed adoption of AI features within SaaS products would increase overall software costs in 2025, according to a Forrester report published in 2024.
Vendors often bill bundled software to enterprise buyers as a value-add, said Alan Pelz-Sharpe, founder of market research firm Deep Analysis. Most enterprise software in 2025 comprises a bundle of products, functions and features, he added.
Bundling makes sense for buyers and sellers by offering a single price point for different products needed to undertake certain business processes. However, problems arise when vendors start bundling products buyers don’t need, Pelz-Sharpe said.
While there are budgets for transformative AI projects, Pelz-Sharpe said there is much less available spend for AI that adds features or alternative ways of summarizing and searching content. Businesses view those types of features as “nice-to-have’s rather than business-critical,” he said.
“Whether in the courts or the playground, we are going to see much more pushback from the market,” Pelz-Sharpe said. “AI has to prove its value. Its value cannot be assumed and charged as a value-add when no or little value has been, in fact, added.”
Microsoft is reviewing the ACCC’s claims in detail and remains “committed to working constructively with the regulator and ensuring our practices meet all legal and ethical standards,” a Microsoft spokesperson said in a Monday email to CIO Dive.
The Australian lawsuit is not the first time Microsoft has faced scrutiny over its bundling practices.
The company decoupled its collaboration tool Microsoft Teams from 365 globally last year as a result of an antitrust investigation launched by the European Commission into Microsoft’s software licensing practices in 2023.
The European Commission raised concerns that Microsoft gained a distribution advantage by removing customers’ choice on whether or not to include access to the Teams product when subscribing to Microsoft 365 and its productivity suites.
