Microsoft (MSFT) Hit by AI Pricing Lawsuit. What's the Risk for Investors?
The Australian Competition and Consumer Commission (ACCC) has filed a lawsuit against Microsoft, alleging misleading practices regarding pricing for Microsoft 365 plans with the Copilot AI tool. The ACCC claims Microsoft did not clearly inform users about the option to retain lower prices by opting out of Copilot. The lawsuit seeks penalties and refunds, with potential fines under Australian law reaching AU$50 million or more. For investors, while the lawsuit poses a legal challenge, it is not expected to significantly impact Microsoft's long-term AI strategy, though it raises concerns about regulatory scrutiny affecting subscription pricing.
More Details About the Lawsuit
The Australian Competition and Consumer Commission (ACCC) has taken Microsoft to federal court, alleging the company misled about 2.7 million Australian personal and family plan users when Copilot was added to Microsoft 365 plans starting October 31, 2024.
For context, the company informed customers that Microsoft 365 prices would jump by 45%, telling them they could either accept the higher cost with AI features included or cancel their subscription. The ACCC stated that Microsoft left out a key detail. Users could have kept their lower price by opting out of the Copilot AI tool, yet the company allegedly did not make that choice clear.
Meanwhile, the watchdog says customers only saw the cheaper plan option after they started canceling their subscriptions. It argues that this design hid important information about pricing and gave consumers a misleading view of their choices.
As part of the lawsuit, the ACCC is seeking penalties, refunds for affected customers, and court orders against both Microsoft Australia and its U.S. parent company. Under Australian consumer law, a single breach can carry a maximum penalty of the greater of AU$50 million, three times any financial benefit gained, or up to 30% of the company's adjusted turnover during the period of the violation if that benefit cannot be calculated.
What This Means for MSFT Investors
For MSFT investors, this case is unlikely to derail the company's long-term AI growth strategy, though it does highlight rising regulatory scrutiny around how tech companies monetize new AI features. The financial hit could be meaningful if penalties stack up, but the bigger concern is the potential for stricter rules that slow subscription pricing power, one of Microsoft's key profit drivers.
Overall, the lawsuit looks like a manageable legal hurdle today, with a possibility of broader consequences if it becomes a trend.
According to TipRanks' Risk Analysis Tool, legal and regulatory issues made up 21.7 percent of Microsoft's overall risk profile in Q2 2025. That is notably higher than the broader sector average of 19.8 percent, signaling increased scrutiny on the company's business practices.
