Canadian COMPETITION LAW

SWEEPING CANADIAN COMPETITION ACT
AMENDMENTS (BILL C-59) PASSED JUNE 20, 2024

On June 20, 2024, Bill C-59 was passed (the Fall Economic Statement Implementation Act, 2023), which introduced the third of three significant rounds of amendments to Canada’s federal Competition Act in two years (together with Bill C-19 and Bill C-56). This new round of amendments to the Competition Act completes a sweeping overhaul of the Competition Act across virtually all key provisions of Canada’s competition legislation. These amendments are also the most significant changes to Canadian competition law since the modern Competition Act came into effect in 1986 replacing the former Combines Investigation Act.

The Bill C-59 amendments, among other things, strengthen the Competition Bureau’s powers to enforce key deceptive marketing provisions of the Competition Act (e.g., relating to drip pricing, performance claims and ordinary selling price (OSP) claims), strengthen private party rights to seek Competition Tribunal remedies (e.g., for civil deceptive marketing and violations of the civil agreements provisions of the Act), introduce new penalties (e.g., administrative monetary penalties for violating the civil agreements provisions of the Act and for reprisal actions penalizing individuals for complying with the Act) and introduce a new clearance regime for environmental protection related agreements. Canada’s Competition Act merger review regime was also substantially overhauled, eliminating the efficiency defence, introducing market share presumptions and a more restrictive remedial test for restoring competition.

These amendments, together with those enacted in June 2022 and December 2023 (Bill C-19 and Bill C-56), increase the potential competition law risk for companies, trade and professional associations and other entities, particularly those without credible and effective competition law compliance programs and that have not reviewed their business practices to reflect Canada’s new competition laws. For the Competition Bureau’s summary of the June 20, 2024 Bill C-59 amendments to the Competition Act, see: Guide to the June 2024 amendments to the Competition Act (June 25, 2024).

Our blogs will be updated to reflect these amendments.

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OVERVIEW OF ENVIRONMENTAL (GREEN) CLAIMS
UNDER THE COMPETITION ACT

Canadians are increasingly concerned about the environment and climate change. In response, companies are increasingly offering “green” products and services to meet consumer demand for environmentally friendly products.

While manufacturers, importers, distributors and others may make self-declared environmental claims, false or misleading green claims can violate the general false or misleading advertising provisions of Canada’s federal Competition Act, the performance claim provisions of the Act, as well as the Textile Labelling Act and Consumer Packaging and Labelling Act.

FALSE OR MISLEADING REPRESENTATIONS
UNDER THE COMPETITION ACT

Canada’s federal Competition Act contains general civil and criminal false or misleading representation provisions (sections 52 and 74.01(1)(a)), which prohibit materially false or misleading representations to promote any product or business interest and are broad enough to include false, misleading or unsubstantiating environmental claims or representations. Such advertising/marketing claims are sometimes also referred to as “greenwashing”.

In addition to the general misleading representation provisions of the Competition Act, the Act also contains a general product performance claim provision (section 74.01(1)(b)) and two environment specific performance claim provisions (sections 74.01(1)(b.1), (b.2)). These performance claims provisions (discussed below) can apply where a environmental related performance claim is made about a particular product (or a business or brand) that is not supported by the required testing under these provisions.

In addition, like advertising claims under the Competition Act generally, in determining whether an environmental advertising claim is false or misleading, both the literal meaning and the general impression of the claim are relevant.

PRODUCT, BUSINESS AND BRAND
PERFORMANCE CLAIMS

The General Performance Claim Provision
of the Competition Act
(Section 74.01(1)(b))

Section 74.01(1)(b) of the Competition Act (the stand-alone performance claim provision) prohibits claims about the performance, efficacy, or length of life of a product that are not based on an adequate and proper test, which can include environmental claims. Under this section, the onus is on the person making the performance claim to have conducted adequate and proper testing before the claim is made.

The Competition Act also prohibits using testimonials unless the person publishing the testimonial can show that it was previously made or published or approved and permission to make/publish it was given in writing. Testimonials/endorsements that are false or misleading can also violate the general misleading advertising provisions of the Competition Act (sections 52 and 74.01). See: Testimonials and Endorsements.

Environment-Related Performance Claim Provisions
of the Competition Act
(Sections 74.01(1)(b.1) and 74.01(1)(b.2))

In addition to the above standalone general product performance claim provision (section 74.01(1)(b)), as a result of amendments to the Competition Act passed on June 20, 2024 under Bill C-59, two specific new provisions can now apply to environment-related performance claims.

The first new performance claim provision (section 74.01(1)(b.1)) captures representations to the public for the purposes of, directly or indirectly, promoting the supply or use of a product or any business interest in the form of a statement, warranty or guarantee of a product’s benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change that is not based on an adequate and proper test (the proof of which lies on the person making the representation).

This performance claim provision may apply to environmental performance claims relating to a specific product and includes the same testing requirement (adequate and proper test) to substantiate claims as the general performance claim provision of the Competition Act (section 74.01(1)(b)).

The second new performance claim provision (section 74.01(1)(b.2)) captures representations to the public for the purposes of, directly or indirectly, promoting the supply or use of a product or any business interest with respect to the benefits of a business or business activity for protecting or restoring the environment or mitigating the environmental and ecological causes or effects of climate change that is not based on adequate and proper substantiation in accordance with internationally recognized methodology (the proof of which lies on the person making the representation).

This performance claim provision may apply to environmental performance claims relating to the benefits of a business or business activity in general (for example, that a brand, compared to a particular product, is “carbon neutral” or “net zero”). This second new performance claim provision has also introduced a new testing requirement for substantiating these types of environmental claims (“adequate and proper substantiation in accordance with internationally recognized methodology”). The Competition Act does not define the concept of “internationally recognized methodology. As such, it will remain to be seen how the Competition Bureau and the Competition Tribunal interpret this new testing standard.

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On July 4, 2024, the Bureau announced that it had received a large number of requests for guidance on the interpretation of the new greenwashing related performance claim provisions of the Competition Act and would develop guidance on an accelerated basis. See: Competition Bureau statement regarding guidance on Competition Act’s new greenwashing provisions.

THE COMPETITION BUREAU’S POSITION
ON ENVIRONMENTAL (GREEN) CLAIMS

According to the Competition Bureau, greenwashing is harmful to competition and innovation because it may mislead consumers to make uninformed purchasing decisions away from compliant businesses that offer products or services that have lower environmental impacts in favour of those that make false or misleading environmental claims. The Bureau has also further warned that “all consumer goods have an impact on the environment” including those that claim to be “green”.

In 2017, the Bureau issued a business alert (It’s not easy being green. Businesses must back up their words), which broadly outlines its approach to determine whether environmental claims are false or misleading. See: Competition Bureau Cautions Businesses to Back Up Environmental Claims, Issues New Guidelines.

In general, the Bureau’s position is that businesses must ensure that environmental claims: (i) are not misleading or likely to result in misinterpretation; (ii) are accurate and specific; (iii) are substantiated and verifiable; (iv) are relevant; and (v) do not include false or misleading endorsements or testimonials from third parties.

In 2008, the Bureau and the Canadian Standards Association (CSA) jointly released more detailed guidelines (Environmental Claims: A Guide for Industry and Advertisers) that were archived in 2021.

These guidelines, which replaced the previous edition published in 2000, were intended to provide users (self-declared environmental claims under Type II environmental labelling for users of ISO 14021) with best practices and practical examples of how the standards may be applied to environmental claims in the Canadian marketplace.

While the guidelines do not reflect the Bureau’s current enforcement approach, they nevertheless outline many types of green claims that can raise misleading advertising issues and, therefore, remain one useful compliance tool for advertisers making environmental claims to reduce risk.

The guidelines include eighteen specific requirements applicable to self‑declared environmental claims and guidelines for the use of symbols (e.g., the Mobius loop), including general misleading advertising guidelines, performance claims, relevance of claims to the particular product, not include any false or misleading claims relating to endorsements or certifications, omit relevant facts and clear disclaimers in close proximity to headline claims.

While the Bureau has in the past supported the use of voluntary standards such as CAN/CSA-ISO 14021 to promote compliance, businesses may adopt other business practices that are not false or misleading and the above guidelines are not law.

POTENTIAL COMPETITION ACT PENALTIES

Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and orders to pay administrative monetary penalties (AMPs).

Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order) or three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.

In addition, as a result of June 2024 amendments to the Competition Act (under Bill C-59), starting on June 20 2025, private parties will also be able to seek leave from the Competition Tribunal to commence proceedings under the civil deceptive marketing practices provisions (Part VII.1) with the only leave requirement for standing being that the proceedings are in the “public interest”.

The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.

ENFORCEMENT OF FALSE OR MISLEADING
ENVIRONMENTAL (GREEN) CLAIMS

The Competition Bureau has consistently enforced and provided guidelines relating to false or misleading environmental (green) claims. For example, in December 2016, the Competition Bureau settled a proposed class action against Volkswagen and Audi in which the two companies agreed to pay $2.1 billion to consumers and a $15 million penalty for allegedly false or misleading environmental marketing claims regarding certain 2.0 litre diesel engines.

In January 2017, the Competition Bureau issued a business alert (It’s not easy being green. Businesses must back up their words) taking the position that businesses must ensure that environmental claims: (i) are not misleading or likely to result in misinterpretation; (ii) are accurate and specific; (iii) are substantiated and verifiable; (iv) are relevant; and (v) do not include false or misleading endorsements from third parties.

In January 2018, the Competition Bureau settled a proposed class action against Volkswagen, Audi and Porsche in which the three companies agreed to pay up to $290.5 million for allegedly false or misleading environmental marketing claims to promote certain vehicles with 3.0 litre diesel engines.

In February 2019, the Competition Bureau published a news release warning consumers of increasing misleading advertising and labelling of bamboo products without the required terms to identify the use of potentially harmful chemicals, including “rayon” or “viscose” to transform bamboo fibers into soft fabrics (e.g., clothing, towels or bedding).

In January 2022, the Competition Bureau settled its investigation into Keurig Canada Inc. in which Keurig agreed to pay an AMP of $3 million for allegedly false or misleading representations regarding the recyclability of its single-use coffee cups. See: Keurig To Pay $3.8 Million Settlement In Misleading Advertising K-Cup Recyclability Case.

In addition to AMPs, the Competition Bureau has entered into consent agreements (i.e., civil settlements with parties) that impose significant additional requirements under section 74.12 of the Competition Act for businesses and, in certain cases, their partners.

These have included consumer product buyback options, donations to approved environmental causes, requiring enhancements of corporate compliance programs and publishing wide-ranging corrective notices in (e.g., on company websites and social media, in national and international news media, in the packaging and labelling of new products and to e-mail subscribers).

These requirements are also often in addition to, and in consideration of, the significant costs incurred by companies to negotiate and execute a negotiated consent agreement with the Competition Bureau.

For more information about Canadian misleading advertising laws, see: Canadian Advertising Law, Endorsements and Testimonials, Misleading Advertising and Performance Claims.

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SERVICES AND CONTACT

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