The consequences associated with making unsubstantiated climate-related claims in Canada increased on June 20, 2024, when Bill C-59, making amendments to the Competition Act, R.S.C., 1985, c. C-34 (the "Act"), passed the third reading of the Senate and received royal assent.
Canada's Competition Bureau has for several years taken environmental claims seriously. The Act already prohibits businesses from making false or misleading claims to promote a service, product or business interest. Businesses in the energy sector have been subject to litigation and inquiries by the Bureau for claims about the environmental benefits associated with energy-related products or businesses.
Amendments to the Act include explicit provisions prohibiting unsupported environmental performance claims promoting products and business interests and place the onus on businesses to substantiate their environmental claims.1 Supplementing existing provisions providing for private rights of action for damages for false and misleading claims, the amendments make it easier for the Bureau to pursue enforcement action in relation to environmental claims (e.g., claims that a product is "recyclable," "green," "compostable," "carbon neutral" or that a business is "sustainable," "clean" or "net-zero") and opens the door to private proceedings to pursue remedies previously available only to the Bureau.
Greenwashing Expressly Classified as Reviewable Conduct
The Act now classifies as reviewable conduct under section 74.01(1), action taken by a person or company who, for the purpose of promoting, directly or indirectly, the supply or use of a product or any business interest:
- (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; or
- (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.
Until guidance regarding the amendments is released, businesses should follow the Bureau's prior articulated best practices of ensuring that environmental claims not be exaggerated, but be substantiated and verifiable through test results (see prior guidance regarding testing for performance claims). The amendments expressly set internationally recognized methodologies as the required standard supporting claims made regarding the benefits of business activities. To meet the onus of establishing that their claims are substantiated, businesses should consider using recognized third-party experts with established credentials for testing of environmental claims, and ensure that testing is performed before a claim is made in the marketplace.
Extending Private Access to the Competition Tribunal to Pursue Greenwashing
Prior to the amendments, private actors were limited to pursuing claims for losses or damages suffered for false and misleading representations counter to s. 52(1) of the Act, seeking leave of the Competition Tribunal to bring an application related to restrictive trade practices under Part VIII of the Act, or urging the Commissioner to launch an inquiry, including into reviewable conduct.
Effective June 2025, the amendments will allow private litigants to bring their own application under s. 103.1(1) to seek leave to the Tribunal to bring an application pertaining to reviewable conduct under s. 74.1 of the Act. Private litigants advancing applications related to reviewable conduct will be able to seek remedies from the Tribunal including prohibition and restitution orders, disgorgement, as well as administrative monetary penalties of up to 3% of a company's annual worldwide gross revenues.
Pursuant to the amendments, the Tribunal may grant leave for such an application "if it is satisfied it is in the public interest to do so," opening the door to private litigants, including public interest groups, advancing private applications alleging greenwashing.
Increased Global Litigation Over Greenwashing
Amendments to the Act targeting net-zero and environmental claims follows a recent wave of increased scrutiny and enforcement action by the Bureau, together with global litigation, pertaining to greenwashing claims.
In 2023, the Commissioner of Competition confirmed that a formal inquiry had been launched, following a complaint filed by Greenpeace Canada, regarding the claim by the Pathways Alliance (composed of Canada's six largest oilsands companies: Canadian Natural Resources, Cenovus, ConocoPhillips, Imperial, MEG Energy and Suncor) that it is "on a path to net zero" in its "Let's clear the air" campaign. In 2022, an inquiry was launched by the Commissioner of Competition regarding the Canadian Gas Association's "Fuelling Canada" campaign whereby natural gas was promoted as "clean" and "affordable" following a complaint by the Canadian Association of Physicians for the Environment. While the referenced inquiries pertaining to greenwashing were launched following complaints, as public interest organizations have been limited in the direct action they can take, commencing in June 2025, we expect similar allegations to be advanced through applications by public interest organizations to the Tribunal, assuming they are able to overcome the requirement to obtain leave.
Earlier this year, a class proceeding was authorized in Quebec regarding the claim by Dollarama and other retailers that the bags they sell at check-out counters are "recyclable." In 2022, a class action was commenced, and remains ongoing, against Keurig following Keurig's consent agreement with the Bureau regarding the marketing of its pods as "recyclable." Class action litigation in Canada aligns with the global trend of class proceedings targeting greenwashing claims, including: a claim in New Zealand that Z Energy had falsely claimed it was taking action to reduce greenhouse gas emissions; a claim in Australia against Energy Australia alleging misleading statements regarding its "carbon neutral" products; and a decision rendered against Shell in the U.K. holding that some of Shell's advertisements exaggerated or omitted material information about the proportion of its business activities comprised of "lower carbon" activities.
Plaintiff class action firms have historically viewed matters being investigated by and/or in which a consent agreement has been reached with the Bureau as being ripe for the commencement of a class proceeding. Class action proceedings have historically been alleged, in conjunction with consumer protection legislation, in relation to breaches of Part VI of the Act. In conjunction with an increase in enforcement proceedings under the Act relating to net-zero and other environmental claims, we expect to see growth in civil litigation claims, in particular class action proceedings for losses and damages alleging false and misleading statements pursuant to s. 52 of the Act.
Businesses should ensure that any net-zero and environmental claims they are making are substantiated to minimize litigation and enforcement risk, and should continue to monitor developments in this space.
Footnote
1. Other significant amendments to the Act include changes to the merger review process, expansion of the merger notification requirements, revisions to the Act's competitor collaboration provisions, the introduction of prohibition orders and administrative monetary penalties against those who take reprisal action against individuals who co-operate with the Bureau, expansion of the scope of the Act's refusal-to-deal provision, requiring sellers to establish that their ordinary selling price is not false or misleading, clarification of the prohibition on drip pricing and the introduction of new clearance certificates for environmental collaborations that do not lessen competition.
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