Canada: An Inconvenient Rule: Change Your Compliance Climate

Between the UN Climate Change Conference last December and the popularity of Al Gore's global warming documentary "An Inconvenient Truth", environmental protection has never before garnered such a great degree of public attention and awareness. Marketers are responding to the public's concern over the environment, including the environmental safety of household and other products, by adding environmental claims to their products' packaging or advertising campaigns.

To respond to the demand from customers for clear information about environmental products, the Competition Bureau (the "Bureau") in partnership with the Canadian Standards Association ("CSA") have released guidelines on making environmental claims in advertisements (the "Guidelines"). The Guidelines modernize and combine previous guidance documents from the Bureau and CSA on environmental advertising.1 Companies that market "green" products that claim to be environmentally friendly should review their environmental claims to ensure they are in compliance with the Guidelines to avoid unwanted Bureau scrutiny.

Companies have always had an obligation to ensure that their marketing practices comply with the misleading advertising provisions of the "Competition Act" (the "Act"), regardless of whether those marketing practices make environmental claims. This means, among other things, ensuring that advertisements do not contain misleading statements and that any product claims are properly substantiated. This issue is important because the consequences to companies found to have engaged in misleading advertising are substantial. In addition to the negative publicity that comes from a Bureau investigation into misleading advertising, violations of the Act's deceptive marketing provisions can result in criminal charges, administrative monetary penalties, or monetary settlements in the seven figures.

The Guidelines do not change the misleading advertising provisions of the Act, but they do tell businesses how the Bureau is going to examine environmental claims in light of those provisions. The Guidelines contain best practices and guiding principles for companies to follow when making environmental claims. Companies that conform their advertising to these best practices will avoid unwanted, time consuming, and costly scrutiny from the Bureau.

The Guidelines are over 60 pages long and provide guidance on topics ranging from the correct use of the recycling Mobius loop to the proper verification required to substantiate an environmental claim. Highlights from the Guidelines include the following:

  • environmental claims must be based on recognized standards or prevailing scientific principles;

  • environmental claims should clearly indicate whether they apply to the complete product, to a certain component or to the packaging;

  • vague claims, including that a product is "environmentally friendly", "ozone friendly", "all natural" or "green" should not be used;

  • "absolute claims" must be made only when something is in fact 100% (e.g., a recycled content symbol and a statement that the product's "made from recycled paper" must only be made when the end product is entirely made from recycled paper);

  • claims about achieving sustainability should not be made part of an environmental claim;

  • substance "free" claims need to be literally true and cannot convey a general impression that is false and misleading by omitting relevant facts (e.g. a product claiming that it is free of a certain chemical and is safe for the environment but fails to disclose that it contains a different harmful chemical could be considered false and misleading);

  • claims regarding reusable/refillable containers must be limited to where the infrastructure exists or facilities or products exist that allow the end user to directly reuse or refill the item; and

  • if collection or drop-off facilities for the purpose of recycling the product or packaging are not conveniently available to a reasonable proportion of purchasers of the product in the area where the product is sold then a detailed qualified claim of recyclability shall be used. Generalized qualifications, such as "Recyclable where facilities exist", are not adequate.

The Bureau's push to eliminate deceptive marketing practices is fuelled by its broader mandate to preserve the integrity of the marketplace. A recent high profile example of this is the Bureau's crackdown on unsubstantiated health benefit and other claims against yoga retailer Lululemon Athletica Inc. that its VitaSea line of clothing produced therapeutic and performance benefits as described in our November 2007 Bulletin "Hemp or Hype – The Rules on Textile Labelling in Canada". Environmental claims are undeniably at the forefront of advertising and the Bureau, with the help of the CSA, is making it clear that any such claim must be substantiated.

The Bureau recognizes that companies may wish to reassess their advertising in light of the Guidelines. Therefore, it is giving companies a one-year transition period to update their advertising. However, the Bureau reserves the right to address particularly egregious cases of misleading advertising during this time.

It is likely that a year from now there will be a surge in investigations of environmental claims by the Bureau to send a message to businesses that it is serious about policing environmental claims. Therefore, companies should take advantage of this one-year transition period to update their environmental claims to avoid a costly and time-consuming Bureau investigation.

Footnote

1. The Bureau has been working on this issue since the 1980's and published a multi-stakeholder guide entitled "Guiding Principles for Environmental Labelling and Advertising" in 1991.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2008 McMillan LLP

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