Nearly one year after Canada amended the Competition Act to establish standards for assessing environmental claims (see B&D's Client Alert), Competition Bureau Canada published final guidelines that outline its general "approach to environmental claims," explain key civil provisions, provide principles for compliance, and address frequently asked questions (FAQs).
The guidelines apply to foreign businesses conducting business in Canada take effect June 20, 2025. Upon this date, private parties will be able to apply directly for permission from the Competition Tribunal to file an application against businesses under the provisions of the Act. Opening this enforcement channel for private parties increases litigation risks for businesses.
Though the Competition Bureau emphasizes that the guidelines are not binding and it is up to Canada's courts to ultimately interpret the Act, the document will be a key resource for companies doing business in Canada as they continue to review their environmental claims and sustainability messaging.
As part of this process, businesses should collaborate across disciplines internally, scrutinize their supply chains, and integrate legal experts to ensure compliance with the Act and avoid facing greenwashing claims.
Key takeaways from the Guidelines include:
- Reinforces that the Act addresses claims made to the public for marketing or promotional purposes, as opposed to other purposes, such as in securities filings.
- Highlights that in implementing new provisions where courts have not yet interpreted key concepts, the Competition Bureau will rely on their "ordinary meaning."
- Elaborates on how businesses may meet the requirement that certain claims be evidence-based through "adequate and proper" testing or substantiation.
- Articulates six Principles of Compliance businesses should use to vet their environmental claims.
- Affirms the due diligence defense for companies that establish they have acted to prevent deceptive marketing and that companies do not have to prove their environmental claims are not false or misleading (though they must be able to substantiate their claims).
- Notes that "internationally recognized methodology" will generally include a methodology recognized in two or more countries.
- Affirms that the ability of private parties to challenge environmental claims does not exceed the Bureau's, and the Competition Tribunal will assess whether a complaint serves the public interest before proceeding.
Environmental Claims
Definition and Scope of Environmental Claims
The Bureau defines environmental claims as any representation related to the environment made for promoting a product or business interest. The guidelines focus on deceptive marketing practices, providing a general overview of the four key civil provisions of the Act, including its two new provisions governing claims about the environmental benefits of a product (paragraph 74.01(1)(b.1)) and of a business or business activity (74.01(1)(b.2)).
Under the new provisions of the Act, environmental claims about a product must be "based on an adequate and proper test," while environmental claims about a business or business activities must be "based on adequate and proper substantiation in accordance with internationally recognized methodology." (emphasis added). The guidelines emphasize that courts have not yet interpreted certain concepts relevant to these new provisions. In the meantime, the Competition Bureau will rely on a word's ordinary meaning.
Environmental Claims about a Product
One key focus of the guidelines is how businesses can meet the requirement that environmental claims about products or businesses be evidence-based, a requirement applied to product performance claims under preexisting 74.01(1)(b). Noting the courts have interpreted "adequate and proper" as applied to claims about a product's performance under 74.01(1)(b) to mean "fit, apt, suitable or as required by the circumstances," the Competition Bureau's guidelines affirm it will apply the same flexible standard to claims about a product's environmental benefit's performance under 74.01(b)(1).
Similarly, the Competition Bureau will apply the courts' interpretation of "testing" under 74.01(b) and require "actual testing"to support claims about a product's environmental benefits.
Environmental Claims about Business Activities
According to the guidelines, courts have not interpreted the terms "adequate and proper" or "substantiation" under 74.01(1)(b.2). The Competition Bureau advises businesses to "choose substantiation that is suitable, appropriate and relevant to" and "sufficiently rigorous to establish" claims about a business or business activities. While substantiation does not necessarily require lab testing, it will "often" need to be "scientific in nature" and, where a business relies upon an internationally recognized methodology that calls for it, third-party verification.
"Recognized" vs. "Substantiation"
The final guidelines clarify that "recognized" means to be acknowledged as valid by standards-setting bodies, regulatory authorities, or industries. Furthermore, an internationally recognized methodology is likely to include one that is "recognized in two or more countries" (and not necessarily by the governments of those countries).
Similarly, the final guidelines define "substantiation" as "establishing by proof or competent evidence." The proper substantiation requirement, therefore, can be met through a variety of internationally recognized methodologies as opposed to an international standard. The guidelines don't clearly establish the amount of "substantiation" required with respect to representations in the form of aspirational goals aimed at reducing impacts or emissions. This is further complicated where a company's growth may challenge progress towards those goals.
The Competition Bureau notes that the guidelines do not address other laws, including the Consumer Packaging and Labelling Act, theTextile Labelling Act, or criminal provisions of the Act that may be relevant to environmental claims.
Principles of Compliance
The Principles of Compliance section in Canada's final guidelines outlines key practices businesses should follow to ensure their environmental claims are truthful and substantiated.
- Principle 1 - Environmental claims should be truthful and not false or misleading: Businesses should avoid making false or exaggerated statements about the environmental benefits of their products or practices.
- Principle 2 - Environmental benefits of a product and performance claims should be adequately and properly tested: Businesses should use reliable methods and evidence to substantiate any claims made.
- Principle 3 - Comparative environmental claims should be specific about what is being compared: When making comparative claims, businesses should clearly specify what is being compared and the extent of the difference to what is being compared.
- Principle 4 - Environmental claims should avoid exaggeration: Claims should not overstate the environmental benefits. Both the literal meaning of the claim and the general impression it conveys to the public is relevant.
- Principle 5 - Environmental claims should be clear and specific – not vague: Businesses should strive for precision in their statements.
- Principle 6 - Environmental claims about the future should be supported by substantiation and a clear plan: Businesses must demonstrate how they intend to achieve these benefits and provide evidence to support their claims.
Frequently Asked Questions
The FAQs section of the guidelines provides further information on how the Competition Bureau may apply the Act in "particular circumstances," addressing compliance and enforcement issues, covering topics such as the scope of the guidelines, the types of claims that require substantiation, and the enforcement process.
Among the issues addressed in the FAQs, the Bureau elaborates on the due diligence defense for businesses that demonstrate they have exercised due diligence to prevent deceptive marketing practices from occurring. Under this defense, the Bureau can order a business to stop deceptive marketing practices but it cannot order a business to pay a penalty or publish a corrective notice.
The Bureau also affirmed it would publish additional general guidance to clarify the process that private parties may use, starting June 20, 2025, to bring actions challenging environmental claims to the Competition Tribunal. Notably, a private applicant must get permission from the Tribunal before filing an application, and the Tribunal will consider whether it is in the "public interest" to do so, which the guidelines do not define. For more information on the enforcement of the Act read a related B&D publication.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
