Canadians are increasingly concerned about environment and climate change. In response, companies are increasingly offering “green” products and services for consumer demand for environmentally friendly products.
While manufacturers, importers, distributors and others may make self-declared environmental claims, false or misleading green claims can violate the general false or misleading provisions of Canada’s federal Competition Act, as well as the Textile Labelling Act and Consumer Packaging and Labelling Act.
False or Misleading Representations
Under the Competition Act
Canada’s federal Competition Act does not contain any specific provisions relating to false or misleading environmental or green product claims.
However, sections 52 and 74.01 of the Competition Act which are the general criminal and civil misleading advertising provisions, prohibit materially false or misleading representations to promote any product or business interest and are broad enough to include false, misleading or unsubstantiating environmental claims or representations. Such advertising/marketing claims are sometimes also referred to as “greenwashing”.
In determining whether a claim is false or misleading, both the literal meaning and the general impression of a representation are relevant.
General impressions in advertising can be established by images, logos, declarations, vignettes or packaging and labelling, sometime referred to as “eco-labels”. These labels may be (i) self‑managed or third‑party‑managed; (ii) verified in‑house or independently verified and/or certified (e.g., the ISO 14020 Series of Standards discussed below); (iii) based on the product life cycle or a single attribute of the product; (iv) available for single or multiple sectors (e.g., by falling under multiple product categories); or (v) designed to provide information, demonstrate environmental leadership or demonstrate relative performance.
In addition, section 74.01(1)(b) of the Competition Act (the stand-alone performance claims provision) further prohibits representations about the performance, efficacy, or length of life of a product that is not based on an adequate and proper test, which can include environmental claims. Under this section, the onus is on the person making the representation to have conducted adequate and proper testing before a performance claim is made.
Section 74.06 of the Competition Act also prohibits using testimonials unless the person publishing the testimonial can show that it was previously made or published or approved and permission to make/publish it was given in writing. Testimonials/endorsements that are false or misleading can also violate the general misleading advertising provisions of the Competition Act (sections 52 and 74.01). See: Testimonials and Endorsements.
According to the Competition Bureau (Bureau), greenwashing is harmful to competition and innovation because it may mislead consumers to make uninformed purchasing decisions away from compliant businesses that offer products or services that have lower environmental impacts in favour of those that make false or misleading environmental claims. The Bureau has also further warned that “all consumer goods have an impact on the environment” including those that claim to be “green”.
In 2017, the Bureau issued a business alert (It’s not easy being green. Businesses must back up their words), which broadly outlines its approach to determine whether environmental claims are false or misleading. See: Competition Bureau Cautions Businesses to Back Up Environmental Claims, Issues New Guidelines.
In general, the Bureau’s position is that businesses must ensure that environmental claims: (i) are not misleading or likely to result in misinterpretation; (ii) are accurate and specific; (iii) are substantiated and verifiable; (iv) are relevant; and (v) do not include false or misleading endorsements/testimonials from third parties.
In 2008, the Bureau and the Canadian Standards Association (CSA) jointly released more detailed guidelines (Environmental Claims: A Guide for Industry and Advertisers) that were archived in 2021.
These guidelines, which replaced the previous edition published in 2000, were intended to provide users (self-declared environmental claims under Type II environmental labelling for users of ISO 14021) with best practices and practical examples of how the standards may be applied to environmental claims in the Canadian marketplace.
While the guidelines do not reflect the Bureau’s current enforcement approach, they nevertheless outline many types of green claims that can raise misleading advertising issues and, therefore, remain one compliance tool for advertisers to reduce risk.
The guidelines include eighteen specific requirements applicable to self‑declared environmental claims and guidelines for the use of symbols (e.g., the Mobius loop), including general misleading advertising guidelines, performance claims, relevance of claims to the particular product, not include any false or misleading claims relating to endorsements or certifications, omit relevant facts and clear disclaimers in close proximity to headline claims.
While the Bureau has in the past supported the use of voluntary standards such as CAN/CSA-ISO 14021 to promote compliance, businesses may adopt other business practices that are not false or misleading and the above guidelines are not law.
Potential Penalties
Some of the potential penalties for violating the civil deceptive marketing practices provisions under Part VII.1 of of the Competition Act include Competition Tribunal or court orders to stop the conduct, publish a corrective notice, pay restitution to consumers and administrative monetary penalties (AMPs).
Following 2022 amendments to the Competition Act, the maximum AMPs for civil deceptive marketing increased: (i) for individuals, up to the greater of $750,000 ($1 million for each subsequent order) and three times the value of the benefit derived from the deceptive conduct if that amount can be reasonably determined; and (ii) for corporations, up to the greater of $10 million ($15 million for each subsequent order), three times the value of the benefit derived from the deceptive conduct or, if the latter amount cannot be reasonably determined, 3% of the corporation’s annual worldwide gross revenues.
The potential penalties for violating the general criminal misleading advertising section of the Competition Act (section 52) include, on indictment, a fine in the discretion of the court and/or imprisonment for up to 14 years and, on summary conviction, a fine of up to $200,000 and/or imprisonment for up to one year.
Enforcement of False or
Misleading Environmental Claims
The Bureau has consistently enforced and provided guidelines relating to false or misleading environmental claims.
For example, in December 2016, the Bureau settled a proposed class action against Volkswagen and Audi in which the two companies agreed to pay $2.1 billion to consumers and a $15 million penalty for allegedly false or misleading environmental marketing claims regarding certain 2.0 litre diesel engines.
In January 2017, the Bureau issued a business alert (It’s not easy being green. Businesses must back up their words) taking the position that businesses must ensure that environmental claims: (i) are not misleading or likely to result in misinterpretation; (ii) are accurate and specific; (iii) are substantiated and verifiable; (iv) are relevant; and (v) do not include false or misleading endorsements from third parties.
In January 2018, the Bureau settled a proposed class action against Volkswagen, Audi and Porsche in which the three companies agreed to pay up to $290.5 million for allegedly false or misleading environmental marketing claims to promote certain vehicles with 3.0 litre diesel engines.
In February 2019, the Bureau published a news release warning consumers of increasing misleading advertising and labelling of bamboo products without the required terms to identify the use of potentially harmful chemicals, including “rayon” or “viscose” to transform bamboo fibers into soft fabrics (e.g., clothing, towels or bedding).
In January 2022, the Bureau settled its investigation into Keurig Canada Inc. in which Keurig agreed to pay an administrative monetary penalty of $3 million for allegedly false or misreading representations regarding the recyclability of its single-use coffee cups. See: Keurig To Pay $3.8 Million Settlement In Misleading Advertising K-Cup Recyclability Case.
In addition to administrative monetary penalties, the Bureau has entered into consent agreements (i.e., civil settlements with parties) that impose significant additional requirements under section 74.12 of the Competition Act for businesses and in certain cases their partners.
These have included consumer product buyback options, donations to approved environmental causes, requiring enhancements of corporate compliance programs and publishing wide-ranging corrective notices in (e.g., on company websites and social media, in national and international news media, on the packaging and labelling of new products and to e-mail subscribers).
These requirements are also often in addition to, and in consideration of, the significant costs incurred by companies to negotiate and execute a negotiated consent agreement with the Bureau.
For more information about Canadian misleading advertising laws, see: Canadian Advertising Law, Cannabis Marketing, Contests, General Impression Test, Misleading Advertising and Testimonials/Endorsements.
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