Microsoft issued a formal apology on Thursday to its Microsoft 365 subscribers in New Zealand, admitting it failed to clearly offer a cheaper, AI-free subscription option.
Microsoft began emailing customers on November 6, offering refunds to those who switch back to the lower-priced “Classic” plan.
Its action follows a lawsuit filed in Australia last month by the country’s consumer watchdog. That suit accused Microsoft of deliberately concealing the cheaper plan during a price hike for its AI-powered Copilot features.
The apology directly addresses growing criticism over the company’s transparency and aggressive AI monetization strategy.
Regulator Lawsuit Prompts Corporate Apology
Following legal pressure from Australian regulators, Microsoft has moved to address consumer complaints in the wider Asia-Pacific region.
A lawsuit filed on October 27 by the Australian Competition and Consumer Commission (ACCC) served as the catalyst, alleging Microsoft misled 2.7 million customers.
Its suit claims the company engineered a false choice, forcing users to either accept a higher-priced plan with Copilot AI or cancel their service entirely.
Central to the ACCC’s case is the argument that a third option, a “Classic” plan retaining original features at the old price, was deliberately concealed.
ACCC Chair Gina Cass-Gottlieb stated, “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…”
The legal challenge appears to have prompted Microsoft’s preemptive apology in neighboring New Zealand.
In an official statement, the company acknowledged its communication failures. “We recognise we could have been clearer in our communications about the full range of Microsoft 365 subscription options including the option to switch to Microsoft 365 [Personal/Family] Classic.”
Its message to customers expressed regret for not meeting its own standards of transparency. “We have been present in New Zealand for more than 35 years, operating on the principles of trust and transparency. We fell short of our standards here, and we apologise.”
Eligible subscribers in New Zealand now have until December 31, 2025, to switch to the “Classic” plan and receive a refund for the price difference.
In a brief statement regarding the Australian lawsuit, a spokesperson said, “Consumer trust and transparency are top priorities for Microsoft, and we are reviewing the ACCC’s claim in detail.”
A Pattern of Pushing AI Upgrades
For millions of subscribers, the choice presented was simple: pay more or cancel. Microsoft’s aggressive global strategy to embed and monetize AI across its product suite is the source of the controversy. This push began in the APAC region in late 2024, when Copilot was first bundled into consumer Microsoft 365 plans.
Integration came with a significant price increase. For example, the annual cost for a Microsoft 365 Personal plan in Australia jumped 45%, from $109 to $159 AUD.
This strategy leverages Microsoft’s massive user base to upsell high-margin AI services, creating what some analysts call an “AI moat” built on decades of vendor lock-in.
By deeply integrating Copilot into daily workflows in Word and Excel, the company aims to make the technology feel indispensable, thereby justifying its cost.
Its consumer bundling strategy is just one part of a multi-faceted effort to make AI a primary revenue driver.
It contrasts with the more flexible pay-as-you-go models introduced for enterprise clients in January 2025, which were designed to lower the barrier to entry for businesses.
A focus on adding AI value has also coincided with the removal of other features, such as the free VPN service with a 50GB cap that was phased out earlier this year due to low engagement.
Flawed Execution Undermines Goodwill
While the apology aimed to rebuild trust, its rollout was immediately beset by technical problems. Reports from New Zealand media outlet NZ Herald detailed a frustrating experience for customers attempting to claim their refund.
Many users, particularly those on Family plans, encountered broken links in the email from Microsoft. This failure forced them into online support chats, where they faced queue times with over a thousand other users, undermining the apology’s intent.
This episode leaves critical questions unanswered. It is unclear whether Microsoft plans to extend a similar apology and refund offer to other markets, including the United States.
Users on online forums have reported identical experiences of discovering the cheaper plan only after initiating the cancellation process.
Furthermore, the ACCC’s lawsuit in Australia’s Federal Court is ongoing. Its outcome could set a powerful precedent for how tech companies bundle and price new AI technologies globally.
The case puts a spotlight on the tension between innovation and consumer rights, questioning whether the rush to monetize AI is coming at the cost of transparency.