Millions in Refunds in Australia Over Expensive AI-Powered Office Subscriptions

Microsoft is set to issue millions of Australian dollars in refunds after Australian consumer advocates accused the company of luring around 2.7 million Australians into purchasing more expensive subscriptions that included the AI assistant Copilot -- even when they did not want it. On Thursday this week, the company issued a written apology to customers, according to the Australian Financial Review (AFR).

According to AFR According to AFR, Microsoft admitted in its apology that it could have been more transparent with individuals who did not find the AI surcharge justified, informing them about the existence of cheaper subscriptions. This admission could mean Microsoft has to pay at least 175 million Australian dollars (currently just under 100 million euros). AFR calculated this based on customers being charged 45 percent more -- and the price increase also affected users with family subscriptions. Affected customers should be able to request a refund before the end of the year.

Price Increase Sparks Consumer Advocate Action

Early last week, it became known that Australia's consumer protection authority filed a lawsuit over the drastic price increases against Microsoft. The trigger was that the company drastically increased the prices of Microsoft 365 subscriptions for private customers and hid the possibility of maintaining the previous prices. The ACCC (Australian Competition and Consumer Commission) stated that Microsoft had led customers to believe that they had to accept the integration of the AI technology Copilot and the associated price increases, which amounted to 30 percent.

Microsoft admitted on Thursday this week that users were only informed about a lower-priced version when they attempted to cancel their subscription. In its message to Australian customers, the company stated that it had not acted in a trustworthy manner and apologized: “Our relationship with our customers is built on trust and transparency, and we apologize for not living up to our standards.”

Even though Microsoft is now offering refunds to affected individuals, further penalties could be imposed depending on the outcome of the ACCC's legal proceedings.

According to the newspaper, the incident put Microsoft in the awkward position of having to justify the high investment costs for building further AI infrastructure, such as data centers, during a conference call with investors about quarterly results. This shows that it is a challenge for companies to convince customers that new AI features are worth a price increase. Satya Nadella reportedly stated in the conference that more than 90 percent of Fortune 500 companies were using Microsoft 365 Copilot.

(dmk)