Speaker 1: I'm Ruby Jones and you're listening to seven am. Tech
Speaker 1: giants have invested billions into AI and are looking for
Speaker 1: ways to get a return. So when Microsoft offered its
Speaker 1: customers its new AI function copilot recently, it told them
Speaker 1: they'd need to pay a higher price for their subscription
Speaker 1: or cancel. AI was now part of the deal, whether
Speaker 1: they wanted it or not. Except it wasn't. Now, the
Speaker 1: A Triple C is suing Microsoft, alleging they intentionally misled
Speaker 1: customers to make them believe they had to pay more.
Speaker 1: It's part of a bigger campaign to crack down on
Speaker 1: big tech subscription tactics. So can the regulator take on
Speaker 1: a six trillion dollar company and win today principle of
Speaker 1: good company law. Hannah Marshall on the A Triple C's
Speaker 1: David and Goliath battle to make Microsoft pay and what
Speaker 1: needs to change to protect customers from tricky priss hugs.
Speaker 1: It's Wednesday, October twenty nine. So to begin with, could
Speaker 1: you just lay out for me what it is that
Speaker 1: the A Triple C is alleging that Microsoft has done so.
Speaker 2: The Agriable C says that Microsoft has misled two point
Speaker 2: seven million consumers about its Microsoft Office three sixty five product. So,
Speaker 2: as people probably know, Microsoft three sixty five is that
Speaker 2: suite of office applications that is very widely used. It
Speaker 2: has things like Microsoft Word, Excel Outlook, it has cloud
Speaker 2: storage included. It's available on a subscription basis online, and
Speaker 2: it makes different offerings for personal users, family users, and
Speaker 2: business and enterprise users. And this case is about personal
Speaker 2: and family users. So around October last year, Microsoft started
Speaker 2: messaging these family and individual users saying, your subscription in
Speaker 2: you all is coming up soon. We've added Copilot, which
Speaker 2: is our AI tool, to all of our different applications,
Speaker 2: and so there's going to be a price hike for
Speaker 2: your new subscription. And it was a big price change.
Speaker 2: It was kind of up to forty five percent depending
Speaker 2: on your subscription. As I told people, you've got two choices.
Speaker 2: You can either just stick with that you'll have the
Speaker 2: price applied, or you can cancel your subscription. What it
Speaker 2: didn't tell people, and this is what the Atriplec's case
Speaker 2: is about, is that there was actually a third option.
Speaker 3: We say, we allege in our core proceedings this was
Speaker 3: misleading because actually there was a hidden third option where
Speaker 3: actually a subscriber could continue with their existing services at
Speaker 3: the current price and not face a price increase.
Speaker 2: Even the way they made this offer to people was
Speaker 2: a little bit sneak in the sense that you would
Speaker 2: get towards the end of the cancelation flow and you
Speaker 2: would get this pop up saying, oh, are you sure
Speaker 2: you really want to cancel? You might lose access to
Speaker 2: all your files, which is probably quite concerning to people.
Speaker 2: Would changing your payment plan help?
Speaker 3: This third option was only revealed to a consumer if
Speaker 3: they decided to start and initiated a cancellation process, at
Speaker 3: which point they were then offered the ability to stay
Speaker 3: with their existing plan, not including Copilot, and for no
Speaker 3: increase in price.
Speaker 1: Okay, so it feels dodgy. It feels like a trick.
Speaker 1: But what does the ageable C say about whether or
Speaker 1: not it breaches the law?
Speaker 2: So the ageable C's alleging that this is misleading or
Speaker 2: deceptive conduct and false representations in relation to the supply
Speaker 2: of goods or services. They are the two strict legal
Speaker 2: allegations that it's making. Essentially, it's saying that Microsoft misled
Speaker 2: customers in three different ways. It misled them about co
Speaker 2: Pilot being necessary to keep their subscription, it misled them
Speaker 2: about the higher price being necessary to keep their subscription,
Speaker 2: and it misled customers by telling them they only had
Speaker 2: two options to take the higher price or to cancel.
Speaker 2: And so AHRIBLEC has been really careful to say that
Speaker 2: they don't take issue with businesses changing their product offerings.
Speaker 2: They don't even take issues with businesses changing their pricing
Speaker 2: and increasing prices. What they do take issue with is
Speaker 2: businesses not being transparent, not properly disclosing what's available to
Speaker 2: customers to kind of manipulate the choices that they can make,
Speaker 2: you know. And so in this case, they were automatically
Speaker 2: being pushed onto the higher price unless they made an
Speaker 2: effort to cancel. And then there was this kind of
Speaker 2: third option which people didn't need know was available, that
Speaker 2: they could use to avoid the price increase that keep
Speaker 2: their subscription.
Speaker 1: And can we talk a bit about the idea of
Speaker 1: intentionality or deliberateness here, I mean, to what extent does
Speaker 1: the ariple C allege that what Microsoft was doing here
Speaker 1: was an intentional attempt to mislead customers.
Speaker 2: So the a triable C does make an allegation that
Speaker 2: Microsoft knew what it was doing, and was deliberate about
Speaker 2: what it was doing.
Speaker 3: And deliberate so that there would be a bigger uptake
Speaker 3: of Copilot and also higher revenue arising from the higher
Speaker 3: prices for the Copilot integrated plans.
Speaker 2: Which is actually really interesting in this case because to
Speaker 2: make out those legal allegations I mentioned before misleading or
Speaker 2: deceptive conduct or false representations, they don't actually have to
Speaker 2: prove Microsoft's intent. Whether its communications were misleading is just
Speaker 2: judged by what would an ordinary reason customer have taken
Speaker 2: them to me, So it doesn't involve any consideration of
Speaker 2: what did Microsoft intend. But the A Triple C has
Speaker 2: gone further in this case and said that Microsoft knew
Speaker 2: that people were skeptical about the value of its Copilot
Speaker 2: AI function that it was adding into each of its applications,
Speaker 2: and deliberately framed these communications to make it harder for
Speaker 2: people to opt out of the new product offering. That's
Speaker 2: interesting because probably for a few reasons. The first is
Speaker 2: that it will feed into penalties. The other point is
Speaker 2: that to plead deliberateness like this is it's a really
Speaker 2: serious allegation, and you wouldn't make that kind of a
Speaker 2: pleading unless you had very strong evidence to support it.
Speaker 2: Before this prosecution happened, the arible C will have conducted
Speaker 2: an investigation, and it has really strong investigative powers. It's
Speaker 2: been reported that it received a number of complaints and
Speaker 2: found out more about what was happening on Reddit. Then
Speaker 2: they can go and compel the production of huge volumes
Speaker 2: of documents from Microsoft and speak to all of its
Speaker 2: executives if they want to. And so the fact that
Speaker 2: following a process like that, they've made a pleading of
Speaker 2: deliberateness or intentional conduct, that to me suggests that they
Speaker 2: may well have found some kinds of smoking guns, and
Speaker 2: that the case could well involve a look under the
Speaker 2: hood at what's going on in terms of the decision making,
Speaker 2: the culture attitude of Microsoft towards its customers, which I
Speaker 2: think will be really interesting.
Speaker 1: Coming up. How much might Microsoft be made to pay
Speaker 1: and so what kinds of penalties are on the table
Speaker 1: in a case like this.
Speaker 2: For a case like this, I think it's going to
Speaker 2: be massive. I think it would comfortably be looking at
Speaker 2: kind of an eight figure type penalty. I think it
Speaker 2: could even quite easily go up into the nine figure
Speaker 2: range million plus. And I say that for a few reasons.
Speaker 2: So under the legal regime, the maximum penalty starts from
Speaker 2: fifty million per contravention. But what normally happens in a
Speaker 2: case like this is that the court will find that
Speaker 2: there's multiple contraventions or courses of conduct, so it can
Speaker 2: award multiple times the penalty. We've also seen a trend
Speaker 2: lately for high penalties coming out of the Arible C's prosecutions.
Speaker 2: So in September, Optus paid one hundred million for uncomfortable conduct.
Speaker 2: Now that was in relation to four hundred vulnerable people.
Speaker 2: This case doesn't involve vulnerable people specifically, but it involves
Speaker 2: two point seven million people, which is a lot more
Speaker 2: than four hundred. Also in August, Google paid fifty five
Speaker 2: million dollars in penalties anti competitive agreements with Telstra and Optus.
Speaker 2: The other factor is this point about deliberateness, because as
Speaker 2: I said, it's not relevant to whether Microsoft is liable,
Speaker 2: but it is relevant and it's a factor that the
Speaker 2: courts can apply when they're assessing what number the penalty
Speaker 2: should sit at. And so I think that's where the
Speaker 2: a Triple C will be wanting to use the deliberateness
Speaker 2: to try and push the penalty up into a really
Speaker 2: high range.
Speaker 1: And Hannah, Microsoft is an almost six trillion dollar company.
Speaker 1: What does it say to you that this is where
Speaker 1: the A Triple C is starting to focus its energy
Speaker 1: on At the moment, I think we've seen a really
Speaker 1: interesting pattern of bold and fearless prosecution since Gina Cascottli
Speaker 1: took over as chair.
Speaker 2: The OPTA's case and the Google case are great examples
Speaker 2: of that, where she's taking on really large companies and
Speaker 2: kind of seeking very large, significant penalties. And I think
Speaker 2: this is kind of the next step in that pattern.
Speaker 2: I think it's a big priority for the A Triple
Speaker 2: C to handle the tech and digital giants and to
Speaker 2: make it very clear to them that even if they're
Speaker 2: based overseas, they can't assume that they're above Australia's consumer
Speaker 2: laws and that it's not just a cost of doing
Speaker 2: business to cope with these infringements and just kind of
Speaker 2: swallow up the penalty and keep on going with business
Speaker 2: with no real.
Speaker 1: Change and understanding that, I mean, what does the A
Speaker 1: Triple C say about the leverage about the power that
Speaker 1: it has to bring companies like this to account?
Speaker 2: So I think that's another thread to this case is
Speaker 2: that it could well play into the A Triple C's
Speaker 2: reform agenda. At the moment, the most common forms of
Speaker 2: prosecution are around misleading or deceptive conduct or unconscionable conduct
Speaker 2: in consumer cases, and A Triple C says that there's
Speaker 2: this gap, which it calls unfair trading practices, which it
Speaker 2: currently struggles to prosecute, and what it means when it's
Speaker 2: talking about unfair trading practices is conduct which targets tactics
Speaker 2: to distort consumer choices. They want to be able to
Speaker 2: prosecute that even where it's transparent. So if you think
Speaker 2: about subscription traps, patterns where businesses make online cancelations difficult,
Speaker 2: and automatic upgrades, those are things that the A Triple
Speaker 2: C says it should be able to target even where
Speaker 2: they're fully disclosed, because people's ability to choose what they
Speaker 2: do and don't buy is being manipulated. And so this
Speaker 2: case could put the new law back on the agenda
Speaker 2: because at the moment, the A Triple C can only
Speaker 2: prosecute the misrepresentation by Microsoft about what those options were,
Speaker 2: but with an unfair trading practices law, it could, for example,
Speaker 2: potentially challenge the auto upgrade even if that was made
Speaker 2: fully transparent. You know the fact of having people pushed
Speaker 2: straight to one outcome and then having to make positive
Speaker 2: steps to do anything other than pay more, that of
Speaker 2: itself could be an unfair practice. And so I can
Speaker 2: imagine that the narrative of this case could readily shift
Speaker 2: back towards talking about an unfair trading practices law.
Speaker 1: And does there seem to be much appetite than the
Speaker 1: government to pursue any kind of unfair treading practices law.
Speaker 2: Back in twenty twenty three, I think it was the
Speaker 2: Albanezy government did commit to introducing this kind of a law,
Speaker 2: and then in twenty twenty four it ran a consultation.
Speaker 2: People put in submissions, they were published, It was getting
Speaker 2: quite a lot of interest and coverage. In March this
Speaker 2: year the government came out and said they would extend
Speaker 2: the law to apply to small businesses as well as
Speaker 2: to consumers. Then we had the election, and then since
Speaker 2: then there's been tumbleweeds. And so I can imagine, again,
Speaker 2: thinking about the a Triple Ce's perspective on this, that
Speaker 2: a case like this could be the impetus to put
Speaker 2: it back under the radar, put it back on the
Speaker 2: spotlight and try and get it enacted.
Speaker 1: Okay, And so in the meantime, in the absence of
Speaker 1: any of these reforms, and while this case is still
Speaker 1: going through the courts, where does this leave consumers, Because,
Speaker 1: as you said, it was only once people decided to
Speaker 1: cancel their subscription that they had any idea that they
Speaker 1: were potentially being misled. And we're living in a dime. Obviously,
Speaker 1: most people have many, many subscriptions to many different tech companies,
Speaker 1: So how could you be confident that you are not
Speaker 1: being tricked in this way.
Speaker 2: It's really hard for us as consumers to avoid being duped.
Speaker 2: These systems are designed to thwart us. And you know,
Speaker 2: subscription models have become increasingly popular, and if you think
Speaker 2: about it, they succeed. They make money in two ways.
Speaker 2: The first way is providing something that we really love
Speaker 2: and want to keep using, and then we actively decide
Speaker 2: to keep the subscription. The second way is by hoping
Speaker 2: that we forget to switch it off or we find
Speaker 2: it too hard to switch it off. And you know,
Speaker 2: in an ideal world, businesses would be competing to make
Speaker 2: something that we really love and want to keep, But
Speaker 2: in fact what's happening is that these businesses, particularly digital businesses,
Speaker 2: are competing around how effectively they can manipulate us and
Speaker 2: either make it hard to switch off or have us
Speaker 2: forget to switch it off, and that where they're focusing
Speaker 2: in terms of bolstering their revenue rather than just giving
Speaker 2: us something that's awesome. And that's what the atriple C
Speaker 2: is trying to fight.
Speaker 1: Well, Hannah, thank you so much for beer time.
Speaker 2: Thank you. Ruby.
Speaker 1: Also in the news, Australia's deal with NARU to send
Speaker 1: former detainees to the tiny island has begun. NARU and
Speaker 1: President David Adiyang confirmed to Parliament last week that the
Speaker 1: first person to be settled under the deal had arrived.
Speaker 2: The group of.
Speaker 1: People who will be sent to Naru are known as
Speaker 1: the m z YQ Cohort. There are about three hundred
Speaker 1: and fifty eight former detainees who had been released into
Speaker 1: the Australian community after a High Court ruling in twenty
Speaker 1: twenty three. Many of them had been convicted of crimes
Speaker 1: or had their visas canceled for other reasons. The Australian
Speaker 1: government has a deal in place to paint a room
Speaker 1: more than two point five billion dollars over the next
Speaker 1: thirty years to settle them there and the Greens will
Speaker 1: team up with the Coalition to demand a Senate inquiry
Speaker 1: into optusa's triple zero outages. In a party room meeting yesterday,
Speaker 1: the minor party decided to back an inquiry, which means
Speaker 1: it's expected to pass and could begin as early as
Speaker 1: next week. The Greens would also like to explore the
Speaker 1: role of the regulator when Optus's outages occurred. I'm Ruby Jones.
Speaker 1: This is seven am.
Speaker 2: Thanks for listening.