Canada Targets Unsupported Environmental Marketing Claims

Recent revisions to Canada’s Competition Act (“the Act”) impose liability for unsupported environmental claims on any business making marketing claims in Canada, typically brand owners or retailers.[1] Covered businesses are required to substantiate any claims made that promote the environmental benefits of their products or business activities through testing or an internationally recognized methodology. These new requirements are broadly aimed at curbing “greenwashing.” Separate amendments add a private right of action provision to the Act, requiring companies to respond to both governmental and “citizen” claims.

The greenwashing provisions of the Act went into effect in June 2024. Claims about the environmental benefits of a product must be “based on an adequate and proper test,” while claims about the environmental benefits of a business or business activity must be “based on adequate and proper substantiation in accordance with internationally recognized methodology.”[2] Canada’s Competition Bureau (“Bureau”) is seeking public comment on proposed guidelines (“Guidelines”) for marketing and promotion activities that include environmental claims.[3] Comments on the Guidelines are due by February 28, 2025.[4] 

The private right of action for deceptive marketing claims goes into effect on June 20, 2025.[5] Private litigants cannot recover damages, but they can seek administrative penalties, receive certain forms of injunctive relief, and potentially recover their attorneys fees. 

The Canadian anti-greenwashing provisions are broader than any state or federal regulations in the U.S. They leave many questions unanswered regarding the type of substantiation required, creating challenging compliance issues for companies navigating the new regulatory regime. 

The New Anti-Greenwashing Provisions in the Competition Act and Proposed Guidelines

At a general level, the Act prohibits companies from making false and misleading representations about their products and business practices.[6] Much like the U.S. Federal Trade Commission’s mandate in the United States,[7] this general requirement has been interpreted in a variety of contexts, including environmental claims. Given the expansion of green claims in the marketplace, Canada’s Parliament adopted amendments to explicitly target the use of those claims for review by the Competition Tribunal—an adjudicative body that resolves cases brought under the Act.[8]

The new provisions make the following types of claims subject to review by the Competition Tribunal:[9]

• Making a statement regarding “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,”[10] or
• Making a statement regarding “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.”[11]

Both provisions put the burden on the business to defend the claim through proper substantiation. This same burden on businesses is already included in a preexisting provision of the Act, which makes statements regarding “the performance, efficacy or length of life of a product” (also known as ‘performance claims’) that are “not based on an adequate and proper test” subject to review by the Competition Tribunal and requires businesses to provide proof for such claims.[12]

The new provisions apply to two different types of claims and require different types of evidence to substantiate those claims. The first new provision applies to claims regarding “a product’s benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change,” while the second new provision applies to claims regarding “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.” Claims regarding a product’s environmental benefits can be substantiated through “an adequate and proper test” – a requirement that already applies to performance claims under the Act. But claims regarding a business or business activity’s environmental benefits must be substantiated pursuant to a new standard: “in accordance with internationally recognized methodology.”

While these provisions are not defined further in the law itself, the Guidelines are intended to interpret and explicate these requirements. Where substantial ambiguities remain unresolved for regulated companies, companies should note that if claims were made in good faith and following an effort to exercise due diligence to prevent deceptive marketing practices from occurring, the Act does provide a due diligence defense.[13] If a court finds that a person exercised due diligence to prevent the reviewable conduct from occurring, a court may only prohibit the person from engaging in the conduct; none of the other available remedies for deceptive marketing claims – monetary penalties, restitution, or dissemination of public notice – may be ordered against the person.[14]

    Claims about the environmental benefits of a product

As an example of a claim about the environmental benefits of a product, the Guidelines describe an apparel company that claims its sweaters do not release microplastic fibers when washed in a washing machine, which helps protect local waterways. However, because the testing of the sweaters’ yarn was not conducted under conditions replicating those of a washing machine, the Bureau would likely conclude that the statement was not based on adequate and proper testing.

But the Guidelines do not fully clarify which claims would be categorized as being about “a product’s benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change,” rather than about the environmental impacts of a business or business activity. For example, the Guidelines do not help address whether the claim that a product is “carbon neutral” would be categorized as a claim about the benefits of the product, as a claim about the process undertaken by the business to create the product, or a claim covered by neither of the new provisions.

The distinction matters because specified claims regarding the environmental benefits of a product must be “based on an adequate and proper test.” Because this requirement already exists for performance claims under the Act,[15] the Bureau expects that courts will interpret the language in the new provision identically to how courts in prior decisions interpreted the existing language. Reviewing courts have determined that an “adequate and proper” test does not need to be a scientific method or meet a test of certainty, but that supporting marketing claims with manuals or anecdotal stories does not constitute the testing required by the Act.[16] The Guidelines do not address whether certification or traceability processes for environmental product attributes, like recycled content, that do not integrate testing in the traditional sense would meet the Act’s requirements for an adequate and proper test.

    Claims about the environmental benefits of a business or business activity

As an example of a claim about the environmental benefits of a business or business activity, the Guidelines describe a company that claims it will be “net-zero” by 2050, but did not develop a concrete plan to identify and mitigate its greenhouse gas emissions in advance. As a result, the Bureau would likely conclude that the claim was not made in accordance with internationally recognized methodology.

Beyond the above example, the Guidelines’ additional clarifications are again minimal. The Guidelines indicate that “substantiation” will not necessarily require a methodology that integrates testing, but that the methodology used must be suitable for the claim. Further, the Guidelines state the “Bureau will likely consider a methodology to be internationally recognized if it is recognized in two or more countries.” The Bureau recognizes that the Act does not necessarily require the methodologies to be recognized by the governments of two different countries, but who else may recognize the methodologies in a country is undefined: individual companies, standard-setting organizations, non-governmental organizations, or trade associations? However, for methodologies required or recommended by government programs in Canada for substantiating environmental claims, the Bureau will assume these are consistent with internationally recognized methodologies.

Enforcement under the Competition Act and Expanded Private Cause of Action

Along with new substantiation requirements, Canada’s recent amendments to the Act also create a new private right of action. Beginning June 20, 2025, private litigants may bring an enforcement action when granted permission by the Competition Tribunal.[17] Private litigants may seek temporary orders and interim injunctions to prohibit deceptive marketing by a targeted company before the litigant’s claims are decided on the merits,[18] but are not entitled to monetary relief outside of the existing and limited restitution remedy available for marketing claims found “false or misleading in a material respect."[19] This brings an entirely new set of individuals, plaintiffs’ attorneys, and NGOs into the enforcement picture. To provide further directions on how these applications will be managed, the Bureau plans to release a guidance document soon regarding private access to the Competition Tribunal.

The new private right of action significantly expands the enforcement infrastructure for deceptive marketing in Canada. The Act authorizes heavy penalties on entities that engage in deceptive marketing practices. Corporations can be subject to a penalty of the greater of (a) up to $10,000,000 (and up to $15,000,000 for each subsequent order) or (b) three times the value of the benefit derived from the deceptive conduct.[20] However, if the value of the benefit cannot be determined, penalties of up to 3% of the corporation’s annual worldwide gross revenues are authorized instead.[21] Companies may also be ordered not to engage in the deceptive conduct, or to alert the public about the deceptive conduct.[22] Companies found to have made a claim that is “false or misleading in a material respect” – another category of claim subject to review under the Act – can be ordered to pay restitution to purchasers of the product.[23] These are the penalties and orders authorized under the Act’s civil prohibitions on deceptive marketing; the Act contains separate criminal prohibitions against “knowingly or recklessly” making marketing claims to the public that are “false or misleading in a material respect.”[24]

Because litigants cannot receive damages for successful claims raised under the new anti-greenwashing provisions and will need to receive permission to bring claims before the Competition Tribunal, the expanded enforcement infrastructure is unlikely to create a cottage industry of for-profit litigants, as has occurred because of California’s Proposition 65. Nonetheless, with the law applying to any company marketing products in Canada, brand owners should ensure that marketing claims are compliant.

Reviewing Claims for Compliance

Because of these legislative changes, companies should carefully review marketing claims. To address the litigation risk created by the new private right of action, companies should review all marketing claims, such as those regarding product quality and durability, and not only those addressing environmental aspects of their products and businesses, such as those addressing sustainability or green attributes.

Companies should ensure that substantiation for claims meets the requirements for that category of claim, and companies should keep accessible records of the proof supporting their claims. The Guidelines state that the supporting information for environmental claims does not need to be publicly available, but companies should consider whether that may be required by other laws, such as California’s requirement that companies relying on carbon offsets to make claims about their climate footprint disclose supporting information regarding those offsets on their website.[25] Any companies that provide supplemental information should note that information included in disclaimers and fine print will not prevent enforcement actions if the claim creates a materially false or misleading general impression without such clarifications.[26]

Although the Guidelines do not resolve all ambiguities introduced by the recent amendments, companies can consider the following principles provided by the Bureau for evaluating whether their environmental claims are deceptive in contravention of the Act:

1. Environmental claims should be truthful, and not false or misleading.
2. The environmental benefit of a product and performance claims should be adequately and properly tested.
3. Comparative environmental claims should be specific about what is being compared.
4. Environmental claims should avoid exaggeration.
5. Environmental claims should be clear and specific – not vague.
6. Environmental claims about the future should be supported by substantiation and a clear plan (companies should note the Bureau’s publications specifically and repeatedly caution about the need to support prospective claims regarding emissions reductions or carbon neutrality).[27]

Finally, when evaluating claims, companies may heed the Bureau’s position in the Guidelines that only representations made solely for the purpose of marketing and promotion are covered by the deceptive marketing provisions of the Act; representations made only for a different purpose, such as informing investors and shareholders about the company through securities filings, are not covered.

Conclusion

Canada’s new amendments to the Act create broad new substantiation requirements for consumer product manufacturers, importers, and retailers. Companies seeking to make environmental claims about products in the Canadian market must ensure compliance not only with the amended Act, but also with other laws enforced by the Bureau, such as the Consumer Packaging and Labeling Act[28] and the Textile Labelling Act.[29] These laws contain their own prohibitions on false and misleading representations in product packaging and labelling.[30]

Please contact members of Marten’s Consumer Products Practice, including James Pollack and Isabel Carey if you have any questions about crafting and supporting marketing environmental product claims.

[1] Competition Act, RSC 1985, c C-34, s 74.01(1)(b.1)-(b.2). For claims on products imported from outside of Canada, where a person who made the covered representation, typically the brand owner, is outside of Canada, the Act treats the representation as if it were made by the person who imports the product into Canada. Competition Act at s 74.03. In other words, liability for deceptive marketing claims included on products produced outside of Canada attaches to the importer, if the brand owner who originally made the claim is not in Canada. 

[2] Competition Act at s 74.01(1)(b.1)-(b.2) (emphasis added).

[3] Competition Bureau Canada, Environmental claims and the Competition Act, Dec. 23, 2024, https://competition-bureau.canada.ca/how-we-foster-competition/consultations/environmental-claims-and-competition-act [“Draft Guidelines”].

[4] Competition Bureau Canada, Competition Bureau seeks feedback on its new guidelines regarding environmental claims (Dec. 23, 2024), https://www.canada.ca/en/competition-bureau/news/2024/12/competition-bureau-seeks-feedback-on-its-new-guidelines-regarding-environmental-claims.html.

[5] Bill C-59, An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 20223 and certain provisions of the budget tabled in Parliament on March 28, 2023, 1^st Sess, 44th Parl, 2024 at cl 254(4) [Bill C-59].

[6] Competition Act at s 74.01(1)(a)-(b).

[7] Victor Xu & James Pollack, Can Orange Juice Claim to be Green?, Marten Law (Apr. 17, 2023), https://martenlaw.com/news/can_orange_juice_claim_to_be_green.

[8] Competition Tribunal, Mandate (last modified Mar. 20, 2020), https://www.ct-tc.gc.ca/en/tribunal/mandate.html.

[9] The Competition Tribunal is the adjudicative body that hears applications made under the Act. Competition Tribunal, Frequently Asked Questions (last modified Dec. 23, 2024), https://www.ct-tc.gc.ca/en/procedure/faq.html.

[10] Competition Act at s 74.01(1)(b.1).

[11] Competition Act at s 74.01(1)(b.2).

[12] Competition Act at s 74.01(1)(b).

[13] Draft Guidelines, Frequently Asked Questions No. 7.

[14] Competition Act at s 74.1(3).

[15] See Competition Act at s 74.01(1)(b) (prohibits making a “representation to the public in the form of a statement, warranty or guarantee of the performance, efficacy or length of life of a product that is not based on an adequate and proper test thereof, the proof of which lies on the person making the representation) (emphasis added).

[16] Canada (Commissioner of Competition) v. Imperial Brush Co., 2008 CACT 2, at paras 122, 216; see also Canada (Commissioner of Competition) v. Chatr Wireless Inc., 2013 ONSC 5315 at para 295.

[17] Bill C-59 at cl 254(4).

[18] Bill C-59 at cl 240.

[19] Competition Act at s 74.1(1)(d).

[20] Competition Act at s 74.1(1)(c)(ii).

[21] Competition Act at s 74.1(1)(c)(ii)(B).

[22] Competition Act at s 74.1(1)(a)-(b).

[23] Competition Act at s 74.1(1)(d).

[24] Competition Act at s 52.

[25] Cal. Health & Safety Code §§ 44475-4475.3.

[26] See Competition Bureau Canada, The Deceptive Marketing Practices Digest – Volume 1 (June 10, 2015), https://competition-bureau.canada.ca/deceptive-marketing-practices-digest-volume-1.

[27] Draft Guidelines; Competition Bureau Canada, The Deceptive Marketing Practices Digest – Volume 7: Environmental Claims and the Competition Act (July 22, 2024), https://competition-bureau.canada.ca/how-we-foster-competition/education-and-outreach/deceptive-marketing-practices-digest-volume-7.

[28] Consumer Packaging and Labelling Act, RSC 1985, c C-38.

[29] Textile Labelling Act, RSC 1985, c T-10.

[30] Consumer Packaging and Labelling Act at s 7; Textile Labeling Act at s 5.