Context
The ACCC (Australian Competition and Consumer Commission) has been examining the competitive dynamics of AI markets since 2024, with particular attention to how dominant software vendors integrate AI features into existing products. This article focuses on the practical implications for Australian businesses making AI procurement decisions.
What Is Happening
Microsoft has been embedding AI features into its productivity suite at an accelerating pace. Copilot is now integrated into Microsoft 365, Windows, Edge, Bing, Teams, and GitHub. For Australian businesses on Microsoft 365, AI is no longer something you go out and buy. It is something that shows up in the software you already pay for.
The ACCC's concern is straightforward: when the dominant productivity software vendor bundles AI into its existing products, does that reduce competition? Does it push businesses toward AI tools that may not be the best fit, simply because they are the most convenient?
This is not hypothetical. When Copilot appears in Word, Excel, and Outlook by default, it becomes the path of least resistance for millions of users. The question is whether that path leads to the best outcomes for those businesses.
Why This Matters for Your Business
If you are running a small or mid-sized business in Australia, the ACCC's regulatory posture might feel abstract. But the underlying issue is very practical: are you choosing your AI tools, or are they being chosen for you?
There are three specific risks to understand:
Default Adoption
When AI is bundled into software you already use, the default behaviour is to use it without evaluating alternatives. Most Stage 2 (ChatGPT Plateau) businesses got stuck this way in the first place. They picked the most convenient tool without checking whether it was the most effective one.
- Copilot may not be the best tool for your specific workflows
- Default adoption skips the workflow audit that determines which AI tool fits where
- You may end up paying for a Copilot add-on for features a Claude or ChatGPT subscription would handle better
Vendor Lock-In
The deeper you integrate Copilot into your workflows, the harder it becomes to switch. This is by design. Microsoft's AI strategy ties Copilot to Microsoft Graph (your emails, files, calendar, Teams data). The more Microsoft products you use, the more useful the AI becomes and the more it costs to leave.
- Workflows built on Copilot are not portable to other AI tools
- Training data (your organisational context) becomes an asset locked inside Microsoft's ecosystem
- Switching costs increase over time as more workflows depend on Copilot
Reduced Market Pressure
When businesses adopt AI by default rather than by choice, there is less pressure on all AI vendors (including Microsoft) to compete on quality, price, and features. The entire market moves slower when the dominant player can grow through bundling rather than through building better AI.
- Standalone AI companies (Anthropic, OpenAI, Perplexity) face an uneven playing field
- Less competition means less innovation pressure for everyone
- Australian businesses end up with fewer viable choices over time
What Copilot Does Well (and Where It Falls Short)
This is not an anti-Microsoft article. Copilot is a capable tool for specific use cases. The problem is when it is adopted as the only AI tool across all workflows without evaluating alternatives.
| Task | Microsoft Copilot | Better Alternative | Why |
|---|---|---|---|
| Email drafting in Outlook | Excellent | None needed | Native integration, context-aware |
| Excel formula generation | Excellent | None needed | Direct cell access, native functions |
| Long document analysis | Good | Claude | Claude handles long documents with high accuracy |
| Creative writing | Adequate | Claude or ChatGPT | More natural voice, better at matching brand tone |
| Code generation | Good (via GitHub Copilot) | Claude Code, Cursor | Better reasoning for complex codebases |
| Research and citation | Adequate | Perplexity | Purpose-built for search with source verification |
| Data privacy control | Good (E5 tier) | Self-hosted models | Full data sovereignty with local inference |
The pattern is clear: Copilot is strongest inside the Microsoft ecosystem. For everything else, purpose-built tools often perform better. The Claude vs ChatGPT comparison covers two of those alternatives in detail.
"The best AI strategy is not picking one vendor and going all-in. It is matching the right model to each workflow. Sometimes that is Copilot. Sometimes it is Claude. Sometimes it is an open-source model running on your own infrastructure. The answer should come from a workflow audit, not from a software bundle."
Huxley Peckham, Founder, Tech Horizon LabsThe ACCC's Position
The ACCC studied AI market dynamics through its Digital Platform Services Inquiry (DPSI), which ran from 2020 to 2025 and ended with a final report in June 2025. The Commission flagged several concerns relevant to AI bundling:
Market concentration. The ACCC noted that the AI market is dominated by a small number of companies that also control the cloud infrastructure AI runs on. Microsoft (Azure), Google (GCP), and Amazon (AWS) collectively host the majority of AI workloads in Australia. When these companies also sell AI products, they have structural advantages that standalone AI companies cannot match.
Self-preferencing. The Commission has been examining whether dominant platforms preference their own AI products over competitors. When Microsoft integrates Copilot into Windows and Office at the operating system level, that is a form of self-preferencing that is difficult for competitors to replicate.
Switching costs. The ACCC has highlighted that AI tools trained on a company's data create switching costs that increase over time. The more you use Copilot with your Microsoft 365 data, the more valuable it becomes and the more costly it is to switch to an alternative.
In October 2025 the ACCC took Microsoft to the Federal Court. It alleges Microsoft misled about 2.7 million Microsoft 365 Personal and Family subscribers when it added Copilot and raised prices, without making clear they could keep a plan without Copilot. The regulator is acting on AI bundling, and businesses should factor that into their planning.
What You Should Do
Regardless of what the ACCC decides, the practical advice for Australian businesses is the same:
1. Evaluate AI tools independently of your existing stack. Do not adopt Copilot (or any AI tool) simply because it comes with software you already use. Run a proper evaluation against alternatives for each workflow you want to automate.
2. Build model-agnostic workflows where possible. Use APIs and middleware rather than platform-native integrations. This lets you swap out the underlying AI model without rebuilding the workflow.
3. Maintain multi-model expertise. Train your team on at least two AI platforms. If all your knowledge is in one tool, you are locked in regardless of whether better alternatives exist.
4. Document your AI workflows. Written process documentation makes it possible to replicate a workflow with a different tool if needed. This is also good practice for compliance, team training, and scaling.
5. Watch the pricing. Microsoft 365 Copilot is charged per user per month on top of your Microsoft 365 plan. Price it for your whole team against Claude and ChatGPT team plans, and choose the tool that delivers more for your workflows.
Frequently Asked Questions
What is the ACCC doing about Microsoft Copilot?
The ACCC is examining Microsoft's practice of bundling AI features like Copilot into existing Microsoft 365 subscriptions through its Digital Platform Services Inquiry. The concern is that bundling AI with dominant productivity software may reduce competition and push businesses toward tools that are not necessarily the best fit.
What is AI bundling and why does it matter?
AI bundling is when a software vendor includes AI features as part of an existing subscription rather than selling them separately. It matters because businesses may adopt bundled AI by default rather than evaluating alternatives, leading to vendor lock-in and suboptimal tool choices.
Should Australian businesses use Microsoft Copilot?
Copilot is capable for tasks within the Microsoft ecosystem (Word, Excel, Outlook, Teams). But businesses should evaluate it against Claude, ChatGPT, Gemini, and Perplexity for their specific workflows before committing. The best AI tool depends on the task.
How can Australian businesses avoid AI vendor lock-in?
Four strategies: (1) Evaluate tools independently of your existing stack. (2) Build model-agnostic workflows using APIs. (3) Train your team on multiple AI platforms. (4) Document workflows so they can be replicated with different tools.