The Canadian government recently introduced changes to the Competition Act which will have a substantial impact on sustainability claims made by Canadian companies. These changes will force many companies to revisit how they promote their products in terms of sustainability in light of the substantial penalties that can be levied by the Competition Bureau.
The impact of the legislative changes are as follows:
- They place important restrictions on how companies can promote their company or their products as sustainable;
- They expose companies to substantial penalties for making unfounded/ unsubstantiated statements re. sustainability;
- These restrictions and penalties are now in force; and
- In 2025 changes will expand the ability of private parties (NGOs etc) to bring complaints to the Competition Bureau on these issues.
Text of Changes
Bill C-59 (Fall Economic Statement Implementation Act, 2023) adds two specific provisions in Section 74.01 of the Competition Act, making certain commercial representations open to review by the Competition Bureau.
74.01 (1) A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever,
- (b.1) makes a representation to the public 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;
- (b.2) makes a representation to the public 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;
The Competition Bureau released a brief overview of the provisions the day following Royal Assent. In the days following, the Competition Bureau received numerous calls from concerned companies for clarification. Some larger Canadian firms may have followed the changes, but the legislative changes attracted considerable attention in the US following an article in Forbes, U.S. Companies Could Face $10 Million In Fines For Green Marketing In Canada, which reported:
Following new regulations, Canada is poised to begin cracking down on businesses for misleading environmental claims in marketing materials. Failure to comply could result in a fine of up to $10 million CAD, or 3% of a company’s gross annual revenues. Canadian companies are reacting, but the new law hasn’t gained much attention in the global business community, even in the United States. However, companies that do business in Canada need to adapt their marketing campaigns immediately or risk heavy penalties.
In a statement issued on July 4, 2024 the Bureau responded, stating the following:
- Following the passage of amendments to the Competition Act on June 20, 2024, the Competition Bureau has received a large number of requests for guidance on the interpretation of new provisions aimed at greenwashing.
- These provisions require that companies be able to substantiate environmental claims made to promote a product or business interest.
- To facilitate compliance with these new provisions, the Bureau will develop guidance on an accelerated basis in consultation with a broad range of stakeholders. To inform this process, we will launch a public consultation in the coming weeks to gather views and input.
CAF members with an interest in this file should contact Bob Kirke, CAF Executive Director at: bkirke@apparel.ca. We are also discussing with law firms the possibility of a webinar on these and other important changes to the Competition Act.
Background / Further Information
Other Jurisdictions
Other jurisdictions, including the United States, the United Kingdom and the European Union have introduced guidance for this industry around environmental claims/greenwashing. Some of this information will be helpful to Canadian companies.
- In the US the FTC Green Guides are currently under review.
- The UK has produced a Green claims code: making environmental claims and recently concluded a consultation on the document: CMA guidance on environmental claims on goods and services.
- The European Union (EU) earlier this year introduced a new regulation on greenwashing.
Articles
- Ready for Change? Bill C-59 Rewrites the Competition Playbook (McMillan)
- Deceptive marketing provisions (greenwashing) (Osler)
- Bill C-59 becomes law: Competition Act hit by a green wave (DLA Piper)
- Squeaky “Clean”: Competition Bureau Combats Greenwashing (McMillan)
- The dramatic expansion of private enforcement of Canada’s competition laws (Osler)