That is correct. From the Microsoft statement: "As part of the investigation, we took the step of a limited review of this third party's Microsoft operated accounts. While Microsoft's terms of service make clear our permission for this type of review, this happens only in the most exceptional circumstances. We apply a rigorous process before reviewing such content. In this case, there was a thorough review by a legal team separate from the investigating team and strong evidence of a criminal act that met a standard comparable to that required to obtain a legal order to search other sites."

One might rephrase it as: 'The TOS allow us to read your data. We will choose to do so if it is sufficiently important to us. We can make this decision unilaterally.'