Italy’s competition authority, the Autorità Garante della Concorrenza e del Mercato (AGCM), formally opened an investigation into Microsoft on June 26, 2026, focusing on alleged unfair commercial practices related to the integration of artificial intelligence tools—specifically Copilot and Designer—into Microsoft 365 subscriptions. The probe marks a significant escalation in regulatory scrutiny of how major tech companies bundle AI services, potentially stifling competition and harming consumers through lock-in effects and opaque pricing.
The AGCM’s move comes after mounting complaints from both consumers and rival software providers who argue that Microsoft has leveraged its dominant position in productivity software to push its AI ecosystem. By embedding Copilot and Designer as default or prominently featured components in Microsoft 365 and then raising subscription prices, the company may be engaging in a form of forced upsell that leaves users with little choice but to pay more for features they may not want or need.
At the heart of the investigation is whether Microsoft’s strategy violates Article 102 of the Treaty on the Functioning of the European Union (TFEU), which prohibits the abuse of a dominant market position. The Italian regulator will examine if the bundling of AI features constitutes an unfair commercial practice, if the price increases are disproportionate to the actual cost and value of the AI additions, and whether the practice impedes competitors from entering or growing in the AI productivity market.
Microsoft 365, formerly Office 365, is the cornerstone of modern enterprise and personal productivity, boasting over 400 million commercial seats and hundreds of millions of consumer subscribers worldwide. In early 2023, Microsoft began a significant push to integrate generative AI into its suite, launching Copilot for Microsoft 365 as a paid add-on and later weaving AI capabilities directly into applications like Word, Excel, PowerPoint, and Teams. The company also introduced Microsoft Designer, an AI graphic design tool, as part of certain subscription tiers.
The pricing changes have been a source of frustration. For enterprises, Copilot for Microsoft 365 was originally priced at $30 per user per month on top of existing subscription costs—a substantial premium. Over time, Microsoft began bundling AI features into higher-tier plans and increasing baseline subscription prices, arguing that the added intelligence justified the cost. Consumer plans also saw adjustments: Microsoft 365 Personal and Family subscriptions in various markets were gradually raised, with AI features like enhanced editing and design tools being rolled out as part of the standard experience.
The AGCM’s intervention is particularly notable because it targets the intersection of antitrust law and the fast-evolving AI sector. Regulators across the European Union have been increasingly wary of how dominant platforms might use their existing ecosystems to corner emerging markets. The EU’s Digital Markets Act (DMA) has already imposed strict rules on gatekeeper platforms, and national authorities are now applying competition law to address perceived gaps.
Italy’s investigation will delve into several key areas. First, the authority will assess whether Microsoft holds a dominant position in the market for office productivity software, which likely it does, given its near-ubiquitous presence in workplaces worldwide. Second, it will examine whether the bundling of AI tools—especially Copilot, which deeply integrates with Microsoft’s own cloud and data services—creates an unfair advantage that competitors cannot easily replicate. Third, the price increases will be scrutinized to determine if they are a direct consequence of this bundling and whether consumers have viable alternatives to avoid paying for AI features they do not use.
Consumer advocacy groups have welcomed the probe. “It’s high time authorities looked at how AI is being forced upon users under the guise of innovation,” said Marco Scialdone, head of litigation at European consumer organization Euroconsumers. “Many consumers and small businesses feel trapped—they need the core Office tools, but they are being pushed into contracts that include AI they never asked for, with no option to opt out without losing access to essential functions.”
For its part, Microsoft has consistently defended its AI integration as a natural evolution of its services, designed to enhance productivity and give users a competitive edge. In previous statements, the company emphasized that Copilot is an optional add-on for many plans and that customers can choose which subscription model suits them best. A Microsoft spokesperson responded to the inquiry by stating, “We believe that our integration of AI tools into Microsoft 365 provides value to our customers and drives innovation in the marketplace. We will cooperate fully with the Italian authority and are confident that our practices comply with EU competition law.”
However, the investigation may reveal inconsistencies in Microsoft’s messaging. While enterprise customers can technically purchase standalone licenses without Copilot, the recent restructuring of plans has made AI-free options less attractive or harder to find. In some consumer tiers, AI features are now part of the baseline, and the only way to avoid them is to downgrade to a legacy plan—which Microsoft may phase out entirely. This “take it or leave it” approach is exactly the kind of conduct that competition regulators find problematic.
The Italian probe also casts a spotlight on Microsoft’s broader European legal challenges. The company has faced multiple antitrust actions over the past two decades, from the browser choice screens of the early 2000s to the more recent Slack-led complaint against Teams bundling. The Teams case, currently under review by the European Commission, bears striking similarities: Microsoft bundled its communication tool with Office 365, allegedly harming competitors like Slack and Zoom. The EU eventually pushed Microsoft to unbundle Teams in Europe, a remedy that might serve as a precedent for how Copilot and Designer are treated.
The timing of Italy’s action coincides with a wave of regulatory recalibration around AI. The EU’s AI Act, which entered into force in 2024, categorizes AI systems by risk and imposes transparency and accountability obligations. But competition law operates on a different axis, targeting market power abuses rather than inherent AI dangers. The Italian investigation could test whether traditional antitrust tools are sufficient to address the unique challenges posed by AI ecosystems, where data network effects and deep integration can quickly entrench a dominant player.
For rival AI startups and established software companies, the outcome could be pivotal. Microsoft’s deep integration of Copilot into its ubiquitous suite creates a massive distribution advantage that few can match. By tying AI to documents, spreadsheets, and presentations used by billions, Microsoft effectively makes Copilot the default AI assistant, draining oxygen from competing tools that must fight for attention. If the AGCM forces Microsoft to unbundle or offer more flexible, modular pricing, it could open the door for other AI assistants to gain a foothold in the enterprise.
Legal experts note that the investigation could take months or even years to conclude, and that any decision by the Italian authority may be subject to appeal. Yet even the initiation of the probe sends a strong signal to the tech industry that regulators are watching AI bundling practices closely. “This is not just about Italy,” said Professor Giorgio Monti, an EU competition law expert at the University of Tilburg. “The AGCM is often a bellwether for broader European enforcement. If they find an infringement, the European Commission may well follow with a pan-EU investigation, similar to what we saw with Google’s Android or shopping cases.”
The financial implications for Microsoft are non-trivial. If found guilty, the company could face fines of up to 10% of its global annual turnover, which in 2025 exceeded $250 billion. More importantly, a forced unbundling could disrupt Microsoft’s revenue model for Copilot, which is a central pillar of its AI monetization strategy. Analysts estimate that Copilot-related revenue could contribute tens of billions of dollars annually within a few years. Any remedy that limits bundling might slow that trajectory.
For Windows enthusiasts and enterprise IT managers, the investigation raises practical questions about future licensing models. Many organizations are currently evaluating whether to adopt Copilot, with some holding back due to cost and uncertainty about real-world productivity gains. An unbundling mandate could give them the flexibility to pick and choose AI tools without committing to a monolithic suite. On the other hand, some may prefer the simplicity of an integrated experience and might be willing to pay the premium. The key issue is whether the market is allowed to decide, or if Microsoft’s market power distorts that choice.
As the investigation proceeds, all eyes will be on the evidence the AGCM gathers. It will likely issue formal requests for information to Microsoft and third parties, analyze subscription data, and assess market conditions. The authority may also coordinate with other EU member states through the European Competition Network. Given the cross-border nature of the services, a coordinated European response is plausible.
In the meantime, consumers and businesses stuck in the Microsoft 365 ecosystem have little immediate recourse. For those seeking to minimize costs, options include downgrading to older plans, switching to the web-only free versions of Office apps, or migrating to alternatives like Google Workspace or LibreOffice. However, none of these alternatives offer a seamless substitute for the full, offline Microsoft 365 experience that many rely on.
The investigation represents a critical test of regulatory agility in the AI age. As Microsoft and other tech giants race to embed artificial intelligence into every layer of their platforms, the line between innovation and unfair competition blurs. Italy’s watchdog is drawing a line in the sand, and the outcome could shape how AI is packaged, priced, and distributed across the globe.