Britain's competition regulator has opened a formal investigation into Microsoft over the way it folded its Copilot AI assistant into consumer Microsoft 365 subscriptions and then renewed millions of households onto pricier plans, in the first major test of whether bundling generative AI into mass-market software can cross the line into misleading consumers.
The Competition and Markets Authority (CMA) announced the probe on 29 July 2026, saying it would examine whether customers on Microsoft 365 Personal and Family plans were given clear information about their options before their subscriptions rolled over at a higher price. The regulator is scrutinising Microsoft's communications, not the technology itself: the question is whether people understood they were being moved onto a more expensive, Copilot-equipped plan when a cheaper, AI-free alternative existed.
"When a business changes its subscription plans, customers need clear and timely information about their options," said Hayley Fletcher, Senior Director for Consumer Protection at the CMA. "Our investigation will consider whether Microsoft customers were misled and ended up paying more as a result."
What Microsoft changed, and what it cost
The timeline dates to January 2025. That month, Microsoft began giving existing Personal and Family subscribers access to new features, including Copilot, at no extra charge for the remainder of their subscription period. When those subscriptions expired, customers were automatically rolled onto a new plan that carried Copilot and a higher price, unless they actively chose another option or cancelled. Microsoft also stopped selling the older, feature-lighter plans to new subscribers.
Existing customers were offered a time-limited escape hatch: a "Classic" plan that preserved the features and the price they had before. But according to the CMA's account, that cheaper option was not made obvious at the point where it mattered most: renewal.
The price gap is the crux of the case. In the UK, the Classic Microsoft 365 Personal plan costs £59.99 a year (or £5.99 a month), against £84.99 a year (or £8.49 a month) for the new Copilot version, a £25 annual increase. The Family plan followed the same pattern, moving from £79.99 a year for Classic to £104.99 for the new plan. Because the change reached across both consumer tiers, it touched a large share of the millions of UK households that pay for a 365 subscription.
The CMA was careful to frame the case as one about disclosure rather than AI. "The CMA is strongly supportive of AI adoption," the regulator said, adding that "no-one should be treated unfairly" and that customers need "clear information which helps them shop around." Fletcher underlined the timing: "At a time when household budgets are squeezed, it's important that people are clear on the price and the subscription plans available."
Microsoft has said it will review the CMA's concerns and continue to cooperate constructively with the regulator. It did not comment in the CMA's announcement, and the watchdog stressed it has reached no conclusions about whether any law was broken.
Why this matters
The investigation is significant less for its size than for its precedent. Bundling generative AI into products people already pay for has become one of the software industry's favourite plays, and this is among the first cases anywhere to test whether the practice, executed through an auto-renewing default, treats consumers fairly. The mechanics the CMA is examining, an opt-out that nudges customers toward a pricier tier while the cheaper choice sits out of easy reach, are common across the subscription economy.
The legal footing matters too. Since April 2025, the CMA has held direct consumer enforcement powers, letting it decide whether consumer law was breached without going through the courts. It has already used them to secure more than £1.95 million in refunds and levy close to £6.2 million in fines. Notably, this probe rests on existing unfair-commercial-practices law rather than the newer Digital Markets, Competition and Consumers Act. If Microsoft is found to have infringed, the CMA can impose fines of up to 10% of global turnover, a figure that, for a company of Microsoft's scale, runs into the billions.
Microsoft is also fighting on several British fronts at once. The company is already the subject of a CMA strategic market status inquiry into its business software, opened in May 2026, and faces a roughly £1 billion cloud-licensing claim in the UK. The subscription probe is narrower and more personal, aimed squarely at the ordinary household bill.
What to watch next
The UK is not acting alone. The Australian Competition and Consumer Commission has begun Federal Court proceedings alleging Microsoft misled "millions of Australians" over the same 365 changes, and the Italian competition authority is investigating whether Microsoft gave consumers enough information to assess the changes and whether its conduct amounted to an "aggressive practice." That cross-border alignment raises the odds of coordinated pressure and, potentially, similar remedies.
The CMA's initial evidence-gathering phase runs through December 2026, with the next public update due by year's end. The remedies on the table, should the regulator find a problem, range from ordering Microsoft to redesign how it presents renewals to seeking redress for affected customers. For an industry racing to monetise AI through defaults and bundles, the outcome will signal how much latitude regulators are willing to grant, and how clearly companies must let customers say no.
"When a business changes its subscription plans, customers need clear and timely information about their options. Our investigation will consider whether Microsoft customers were misled and ended up paying more as a result."- Hayley Fletcher, Senior Director for Consumer Protection, CMA