Microsoft has issued a formal apology to its 2.7 million Australian subscribers and offered refunds following a legal action against the tech giant alleging it deliberately concealed cheaper subscription alternatives when bundling AI features with steep price increases.

The apology, delivered Thursday via email to affected customers, comes 10 days after the Australian Competition and Consumer Commission filed legal proceedings against Microsoft over the integration of its Copilot AI assistant into Microsoft 365 Personal and Family plans last October.

Microsoft confirmed to subscribers that it introduced AI capabilities into Microsoft 365 Personal and Family subscriptions in response to demand for advanced AI tools, but acknowledged in its statement that it "could have been clearer about the availability of a non-AI-enabled offering with subscribers."



"Our relationship with our customers is based on trust and transparency, and we apologise for falling short of our standards," Microsoft wrote in the email to subscribers.

The tech giant has outlined two options for subscribers in its statement: stay on the current AI-enabled plan at $10-$12 (AU$16-$18) monthly, or switch to Microsoft 365 Classic at $7-$9 (AU$11-$14) monthly without Copilot. 

Customers switching to the Classic plan by the end of the year will receive refunds for the price difference dating back to their first renewal after November 30, 2024, the company said. 

The ACCC had claimed in its filing that Microsoft deliberately omitted mention of its cheaper “Classic” plans that retained original features without Copilot at previous prices, and is seeking penalties, injunctions, declarations, consumer redress, and costs from the company.

“Companies should explicitly separate AI and non-AI pricing tiers at launch, as well as state the pros and cons of each to allow consumers to make more informed decisions,” Joni Pirovich, Founder and CEO of agentic operating system Crystal aOS, told Decrypt. 

“Price should not be an arbitrarily discriminating factor to AI adoption that could truly benefit consumers,” she added.

Australian subscribers who wish to remain on Microsoft 365 Personal or Family with AI features don’t need to take any action, the company wrote. At the same time, those switching to the Classic plan must keep recurring billing enabled to maintain access.

"We have been present in Australia for more than 40 years, operating on the principles of trust and transparency," the company said. "We will learn from this and improve."

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