On July 22, 2024, the Competition Bureau (the "Bureau") announced that it is launching a public consultation to gather stakeholder feedback relating to the interpretation and application of the new greenwashing provisions of the Competition Act (the "Act"). Contemporaneously with this announcement, the Bureau also published a new issue (Volume 7) of its Deceptive Marketing Practices Digest, focusing on the application of provisions of the Act which existed prior to the amendments to environmental claims. As discussed below, the Digest does provide limited new guidance regarding environmental "claims about the future" (such as net zero claims).
By way of background, as described in our previous blog post, significant competition law reform has recently taken place in Canada, including the passage of Bill C-59 on June 20, 2024. This Bill introduced two new civil provisions to the Act focusing on environmental claims:
- Representations Relating to a Product (or Service): This provision prohibits a person from making a representation to the public in the form of a statement, warranty or guarantee of a product's or service'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.
- Representations Relating to a Business or Business Activity: This provision prohibits a person from making 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.
While the Bureau and the Competition Tribunal (the "Tribunal") have each considered and provided guidance on what can be considered "adequate and proper" testing in the context of the long-standing general provision regarding performance claims, little substantive guidance has been provided with respect to the specific context of environmental claims. Moreover, the requirement for "proper substantiation in accordance with internationally recognized methodology" is a new test that has not previously been considered by the Bureau or the Tribunal.
Following the implementation of the above provisions, there has been significant concern raised by businesses as well as members of the private bar regarding the lack of guidance with respect to the interpretation and application of these new provisions (which can result in significant penalties for businesses).
Public Consultation
The Bureau has launched a public consultation to address these concerns and to work towards providing the much-needed guidance. The consultation will inform the Bureau's development of enforcement guidance about not only these new provisions, but environmental claims in general (which can also fall within the scope of other, more general provisions, of the Act).
Recognizing that the Bureau is not itself an expert with respect to environmental issues, the consultation is seeking feedback on a number of specific questions, which focus on the following issues:
- The types of environmental claims which are commonly made;
- The types of environmental claims which are less likely to be based on adequate and proper testing/substantiation;
- The types of environmental claims which are more difficult to test/substantiate (and why);
- What context and factors the Bureau should consider when evaluating whether the testing/substantiation of a claim is "adequate and proper";
- Which internationally recognized methodologies the Bureau should consider, and what the limitations of these methodologies are; and
- Any challenges that businesses may face in complying with these new laws.
The Bureau invites interested parties to provide feedback on the consultation questions by September 27, 2024, by emailing greenwashingconsultationecoblanchiment@cb-bc.gc.ca. Each submission received will be published on the Bureau's website unless the provider requests that it be kept confidential.
Deceptive Marketing Digest: Volume 7
In an effort to provide some interim guidance, the Bureau has also released Deceptive Marketing Practices Digest: Volume 7 (the "Digest"), which focuses on environmental claims and provides some "high-level tips" to assist businesses with compliance with the provisions of the Act already in place prior to the amendments.
The Digest does not discourage businesses from making environmental claims, as such claims – where truthful and not misleading – can provide consumers with beneficial information. The Digest begins by emphasizing that one of the main concerns with environmental advertising is the asymmetry of information, and the inability for consumers to evaluate the truthfulness of many environmental claims. According to the Bureau, as consumers are increasingly making buying decisions on the basis of environmental factors, the potential for false environmental claims to distort the market and harm both competitors and customers is growing.
As the prevalence of environmental claims has increased, the Bureau has also received an increasing number of complaints in this regard. The Digest notes that these complaints generally relate to:
- Claims regarding the composition of products or packaging (i.e. "100% recycled paper" or "no micro plastics");
- Claims regarding the production process of products (i.e. "produced using renewable energy" or "carbon neutral production");
- Claims regarding the disposal of products (i.e. "compostable" or "recyclable");
- Comparative claims (i.e. "now made with 25% less water");
- Vague claims with no specification of how the product is environmentally beneficial (i.e. "eco-friendly"); and
- Claims regarding environmental improvements a business will accomplish in the future (i.e. carbon neutral by a certain date).
It is important to note that the Bureau is not stating that these are the most common types of representations found to be offside the Act, but simply highlighting that these are the most commonly received complaints. As such, businesses should be aware that when making claims similar to the above – regardless of whether such claims are reasonable and supported by adequate and proper testing/substantiation – they may become the subject of complaints to the Bureau.
While the Digest does not provide any guidance regarding the new provisions of the Act, it does expand upon the existing general guidance the Bureau previously provided regarding environmental claims. The Digest advises as follows with respect to environmental claims:
- Be truthful, and not false or misleading
The Digest highlights that both the literal meaning as well as the general impression of a claim must be considered, and advises that the general impression is determined by examining the entirety of the representation and its context, including, among other things, the words or phrases used, the way in which the text is displayed, as well as the visual elements and their context. The Digest notes that a claim may be literally true, but still create a false or misleading general impression and that a claim may also be false or misleading if important information is omitted.
- Ensure claims are properly and adequately tested
The Digest refers to prior guidance provided by the Bureau in respect of the performance claim provisions of the Act which existed prior to the amendments, but does not expand on this guidance.
In general, to be considered adequate and proper, the Bureau has noted that the testing must:
- be conducted before the performance claims are made;
- be done under controlled circumstances to eliminate external variables;
- eliminate subjectivity as much as possible;
- reflect the real-world usage of a product (such as in-home or outdoor use);
- support the general impression created by the marketing claims; and
- establish that the product causes the desired effect in a material manner.
Moreover, the Bureau has also noted that businesses should avoid:
- Have a clear understanding of what needs to be done to achieve what is being claimed;
- Make sure to have a concrete, realistic and verifiable plan in place to accomplish the objective, with interim targets; and
- Be sure there are meaningful steps underway to accomplish the plan.
The Digest highlights that, in relation to the newly enacted provisions discussed above which require testing/substantiation, further guidance will be provided in this regard in the future (i.e. following the public consultation discussed above).
- Comparative claims: be specific about what is being compared
When making comparisons, the Digest highlights that it is important to clearly specify what is being compared, as well as the differences between what is being compared, in order to avoid comparative environmental claims which are, according to the Digest, vague, exaggerated or misleading.
- Avoid exaggeration
By way of the example, the Digests advises businesses to "consider if focussing on one environmental benefit of a business's practices conveys the general impression that the business pollutes much less than it actually does?"
- Avoid vague environmental claims in favour of clear and specific ones
According to the Digest, where a claim is vague, it may create a general impression that the environmental benefit is quite broad and therefore, the Digest warns, vague claims can be "difficult to back up". By way of example, the Digest notes that "a claim that a particular product is "eco-friendly" may convey the impression that the product is beneficial for the environment throughout its entire life cycle." Among other things, the Digest encourages businesses to be clear regarding whether the claim applies to part of or to the whole of a product, service, or business, or applies to a specific part of a production process or practice.
Aspirational Claims About the Future
Notably, the Digest does provide limited new guidance regarding environmental "claims about the future". This is the first substantive guidance the Bureau has provided with respect to these types of future-looking claims. In general, the Digest notes that businesses should "[a]void aspiration claims about the future" and that businesses should ensure that claims about the future are "factual rather than aspirational."
While the Digest recognizes that many businesses "want to show strong and meaningful environmental commitments about the future" and that "[i]t is commendable when well-intentioned businesses set aggressive goals and timelines about future environmental performance," it notes that such claims can raise concern.
The Digest notes that, before making such claims, businesses should:
- Have a clear understanding of what needs to be done to achieve what is being claimed;
- Make sure to have a concrete, realistic and verifiable plan in place to accomplish the objective, with interim targets; and
- Be sure there are meaningful steps underway to accomplish the plan.
The Digest further cautions that "[i]f businesses have not considered all these elements, they should either implement changes before making the claim or change the claim itself." Even where there is a clear plan to accomplish an environmental objective, the Digest warns that "care must still be taken to ensure that the claim is not misleading."
The Digest notes that claims about the future may also fall within the new provisions of the Act, and that further guidance will be provided in this regard in the future (i.e. following the public consultation discussed above).
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