I'm Ruby Jones and you're listening to seven am. Tech giants have invested billions into AI and are looking for ways to get a return. So when Microsoft offered its customers its new AI function copilot recently, it told them they'd need to pay a higher price for their subscription or cancel. AI was now part of the deal, whether they wanted it or not. Except it wasn't. Now, the A Triple C is suing Microsoft, alleging they intentionally misled customers to make them believe they had to pay more.
It's part of a bigger campaign to crack down on big tech subscription tactics. So can the regulator take on a six trillion dollar company and win today principle of good company law. Hannah Marshall on the A Triple C's David and Goliath battle to make Microsoft pay and what needs to change to protect customers from tricky priss hugs. It's Wednesday, October twenty nine. So to begin with, could you just lay out for me what it is that the A Triple C is alleging that Microsoft has done so.
The Agriable C says that Microsoft has misled two point seven million consumers about its Microsoft Office three sixty five product. So, as people probably know, Microsoft three sixty five is that suite of office applications that is very widely used. It has things like Microsoft Word, Excel Outlook, it has cloud storage included. It's available on a subscription basis online, and it makes different offerings for personal users, family users, and
business and enterprise users. And this case is about personal and family users. So around October last year, Microsoft started messaging these family and individual users saying, your subscription in you all is coming up soon. We've added Copilot, which is our AI tool, to all of our different applications, and so there's going to be a price hike for your new subscription. And it was a big price change. It was kind of up to forty five percent depending
on your subscription. As I told people, you've got two choices. You can either just stick with that you'll have the price applied, or you can cancel your subscription. What it didn't tell people, and this is what the Atriplec's case is about, is that there was actually a third option.
We say, we allege in our core proceedings this was misleading because actually there was a hidden third option where actually a subscriber could continue with their existing services at the current price and not face a price increase.
Even the way they made this offer to people was a little bit sneak in the sense that you would get towards the end of the cancelation flow and you would get this pop up saying, oh, are you sure you really want to cancel? You might lose access to all your files, which is probably quite concerning to people. Would changing your payment plan help?
This third option was only revealed to a consumer if they decided to start and initiated a cancellation process, at which point they were then offered the ability to stay with their existing plan, not including Copilot, and for no increase in price.
Okay, so it feels dodgy. It feels like a trick. But what does the ageable C say about whether or not it breaches the law?
So the ageable C's alleging that this is misleading or deceptive conduct and false representations in relation to the supply of goods or services. They are the two strict legal allegations that it's making. Essentially, it's saying that Microsoft misled
customers in three different ways. It misled them about co Pilot being necessary to keep their subscription, it misled them about the higher price being necessary to keep their subscription, and it misled customers by telling them they only had two options to take the higher price or to cancel. And so AHRIBLEC has been really careful to say that they don't take issue with businesses changing their product offerings. They don't even take issues with businesses changing their pricing
and increasing prices. What they do take issue with is businesses not being transparent, not properly disclosing what's available to customers to kind of manipulate the choices that they can make, you know. And so in this case, they were automatically being pushed onto the higher price unless they made an effort to cancel. And then there was this kind of third option which people didn't need know was available, that they could use to avoid the price increase that keep their subscription.
And can we talk a bit about the idea of intentionality or deliberateness here, I mean, to what extent does the ariple C allege that what Microsoft was doing here was an intentional attempt to mislead customers.
So the a triable C does make an allegation that Microsoft knew what it was doing, and was deliberate about what it was doing.
And deliberate so that there would be a bigger uptake of Copilot and also higher revenue arising from the higher prices for the Copilot integrated plans.
Which is actually really interesting in this case because to make out those legal allegations I mentioned before misleading or deceptive conduct or false representations, they don't actually have to prove Microsoft's intent. Whether its communications were misleading is just judged by what would an ordinary reason customer have taken them to me, So it doesn't involve any consideration of
what did Microsoft intend. But the A Triple C has gone further in this case and said that Microsoft knew that people were skeptical about the value of its Copilot AI function that it was adding into each of its applications, and deliberately framed these communications to make it harder for people to opt out of the new product offering. That's interesting because probably for a few reasons. The first is
that it will feed into penalties. The other point is that to plead deliberateness like this is it's a really serious allegation, and you wouldn't make that kind of a pleading unless you had very strong evidence to support it. Before this prosecution happened, the arible C will have conducted an investigation, and it has really strong investigative powers. It's been reported that it received a number of complaints and
found out more about what was happening on Reddit. Then they can go and compel the production of huge volumes of documents from Microsoft and speak to all of its
executives if they want to. And so the fact that following a process like that, they've made a pleading of deliberateness or intentional conduct, that to me suggests that they may well have found some kinds of smoking guns, and that the case could well involve a look under the hood at what's going on in terms of the decision making, the culture attitude of Microsoft towards its customers, which I think will be really interesting.
Coming up. How much might Microsoft be made to pay and so what kinds of penalties are on the table in a case like this.
For a case like this, I think it's going to be massive. I think it would comfortably be looking at kind of an eight figure type penalty. I think it could even quite easily go up into the nine figure range million plus. And I say that for a few reasons. So under the legal regime, the maximum penalty starts from fifty million per contravention. But what normally happens in a case like this is that the court will find that there's multiple contraventions or courses of conduct, so it can
award multiple times the penalty. We've also seen a trend lately for high penalties coming out of the Arible C's prosecutions. So in September, Optus paid one hundred million for uncomfortable conduct. Now that was in relation to four hundred vulnerable people. This case doesn't involve vulnerable people specifically, but it involves two point seven million people, which is a lot more
than four hundred. Also in August, Google paid fifty five million dollars in penalties anti competitive agreements with Telstra and Optus. The other factor is this point about deliberateness, because as I said, it's not relevant to whether Microsoft is liable, but it is relevant and it's a factor that the courts can apply when they're assessing what number the penalty
should sit at. And so I think that's where the a Triple C will be wanting to use the deliberateness to try and push the penalty up into a really high range.
And Hannah, Microsoft is an almost six trillion dollar company. What does it say to you that this is where the A Triple C is starting to focus its energy on At the moment, I think we've seen a really interesting pattern of bold and fearless prosecution since Gina Cascottli took over as chair.
The OPTA's case and the Google case are great examples of that, where she's taking on really large companies and kind of seeking very large, significant penalties. And I think this is kind of the next step in that pattern.
I think it's a big priority for the A Triple C to handle the tech and digital giants and to make it very clear to them that even if they're based overseas, they can't assume that they're above Australia's consumer laws and that it's not just a cost of doing business to cope with these infringements and just kind of swallow up the penalty and keep on going with business with no real.
Change and understanding that, I mean, what does the A Triple C say about the leverage about the power that it has to bring companies like this to account?
So I think that's another thread to this case is that it could well play into the A Triple C's reform agenda. At the moment, the most common forms of prosecution are around misleading or deceptive conduct or unconscionable conduct in consumer cases, and A Triple C says that there's this gap, which it calls unfair trading practices, which it currently struggles to prosecute, and what it means when it's talking about unfair trading practices is conduct which targets tactics
to distort consumer choices. They want to be able to prosecute that even where it's transparent. So if you think about subscription traps, patterns where businesses make online cancelations difficult, and automatic upgrades, those are things that the A Triple C says it should be able to target even where they're fully disclosed, because people's ability to choose what they
do and don't buy is being manipulated. And so this case could put the new law back on the agenda because at the moment, the A Triple C can only prosecute the misrepresentation by Microsoft about what those options were, but with an unfair trading practices law, it could, for example, potentially challenge the auto upgrade even if that was made
fully transparent. You know the fact of having people pushed straight to one outcome and then having to make positive steps to do anything other than pay more, that of itself could be an unfair practice. And so I can imagine that the narrative of this case could readily shift back towards talking about an unfair trading practices law.
And does there seem to be much appetite than the government to pursue any kind of unfair treading practices law.
Back in twenty twenty three, I think it was the Albanezy government did commit to introducing this kind of a law, and then in twenty twenty four it ran a consultation. People put in submissions, they were published, It was getting quite a lot of interest and coverage. In March this year the government came out and said they would extend the law to apply to small businesses as well as to consumers. Then we had the election, and then since
then there's been tumbleweeds. And so I can imagine, again, thinking about the a Triple Ce's perspective on this, that a case like this could be the impetus to put it back under the radar, put it back on the spotlight and try and get it enacted.
Okay, And so in the meantime, in the absence of any of these reforms, and while this case is still going through the courts, where does this leave consumers, Because, as you said, it was only once people decided to cancel their subscription that they had any idea that they were potentially being misled. And we're living in a dime. Obviously, most people have many, many subscriptions to many different tech companies, So how could you be confident that you are not being tricked in this way.
It's really hard for us as consumers to avoid being duped. These systems are designed to thwart us. And you know, subscription models have become increasingly popular, and if you think about it, they succeed. They make money in two ways. The first way is providing something that we really love and want to keep using, and then we actively decide to keep the subscription. The second way is by hoping that we forget to switch it off or we find
it too hard to switch it off. And you know, in an ideal world, businesses would be competing to make something that we really love and want to keep, But in fact what's happening is that these businesses, particularly digital businesses, are competing around how effectively they can manipulate us and either make it hard to switch off or have us forget to switch it off, and that where they're focusing in terms of bolstering their revenue rather than just giving
us something that's awesome. And that's what the atriple C is trying to fight.
Well, Hannah, thank you so much for beer time.
Thank you. Ruby.
Also in the news, Australia's deal with NARU to send former detainees to the tiny island has begun. NARU and President David Adiyang confirmed to Parliament last week that the first person to be settled under the deal had arrived.
The group of.
People who will be sent to Naru are known as the m z YQ Cohort. There are about three hundred and fifty eight former detainees who had been released into the Australian community after a High Court ruling in twenty twenty three. Many of them had been convicted of crimes
or had their visas canceled for other reasons. The Australian government has a deal in place to paint a room more than two point five billion dollars over the next thirty years to settle them there and the Greens will team up with the Coalition to demand a Senate inquiry into optusa's triple zero outages. In a party room meeting yesterday, the minor party decided to back an inquiry, which means it's expected to pass and could begin as early as next week. The Greens would also like to explore the
role of the regulator when Optus's outages occurred. I'm Ruby Jones. This is seven am.
Thanks for listening.