Greenhouse gas (“GHG”) emissions, sustainability, and other environmental issues have become an increasingly significant focus over the past decade. There are growing international expectations for action and transparency regarding sustainability that are becoming an integral part of corporate governance and business practices (although it appears this momentum will pause in the U.S. under the Trump Administration). While some issues can be addressed by firms unilaterally, collaboration may be desirable, or even necessary, to advance others. In this context, policymakers and enforcement authorities are considering how competition laws may support or impede the achievement of climate and other environmental objectives.
The two main areas in which sustainability issues and competition policy interact with one another are through deceptive marketing laws that address misleading environmental claims (i.e., “greenwashing”—ideally without chilling communications that address sustainability aspirations and plans, sometimes referred to as “greenhushing”) and through the application of competitor collaboration (or “concerted practices”) laws to multi-firm environmental initiatives. This article examines Canada’s approach to the latter issue through the introduction in 2024 of an innovative environmental certificates regime in the Competition Act. At its core, this regime allows the enforcement agency, the Canadian Competition Bureau (the “Competition Bureau”), once it concludes that an agreement between competitors with an environmental purpose is not anticompetitive, to issue a certificate that prevents any subsequent challenge of the agreement under the Competition Act by the Competition Bureau or by private parties.
Across the globe, beginning with the Netherlands Authority for Consumers and Markets in June 2022, numerous competition authorities have developed enforcement guidelines or taken other steps to address situations where competition legislation like Article 101 of the EU Treaty or its international counterparts may chill collaborations between specific competitors or industry-wide initiatives aimed at addressing environmental harms. The most common approach has been to use enforcement discretion to refrain from challenging collaborations between competitors which may have significant environmental benefits. The jurisdictions adopting this approach include the Netherlands, Greece, the United Kingdom, the European Union, France, Germany, Italy, Austria, Japan, and Australia.
In 2022, the Competition Bureau held a Competition and Green Growth Summit but did not address the chilling effects that the competitor agreement provisions in the Competition Act may have on beneficial environmental collaborations. Nevertheless, during the process leading to recent amendments of the Competition Act, environmental collaborations were identified as a potential topic that could be addressed. One of the authors of this article proposed that the economic and non-economic environmental effects of such collaborations could and should be balanced against any competitive effects. This approach could be implemented by having the Competition Tribunal (“Tribunal”) adjudicate such issues or by providing a politically accountable decision maker (such as the federal Cabinet) with the discretion to make decisions where environmental and competition policy objectives may come into conflict.
Canada’s Parliament adopted a somewhat different approach: where an agreement between competitors has a legitimate environmental purpose, a certificate insulating the collaboration from any challenge by the Competition Bureau or private parties may be issued by the Competition Bureau if it concludes that a substantial lessening or prevention of competition (“SLPC”) is unlikely to occur as a result of the agreement. There have not yet been any certificates issued.
Anchoring the availability of certificates around the impact on competition does not establish an explicit trade-off or balancing of environmental benefits and competitive effects. However, the SLPC test focuses on economic welfare, encompasses non-price as well as price-based effects, explicitly requires consideration of change and innovation, and may also be informed by other relevant factors including productive and dynamic efficiencies. Many of these considerations could be relevant in the assessment of environmental collaborations.
There are three prerequisites for competitors (and/or other parties) seeking to obtain an environmental certificate from the Competition Bureau:
The merger and competitor agreement provisions set out a non-exhaustive list of factors that may be relevant to making an SLPC determination. They include the effectiveness of existing competition, the availability of acceptable substitutes, ease of or barriers to entry/expansion, and the likelihood of future change or innovation. The lists also refer to the consideration of “any other relevant factor,” which may include countervailing buyer power and efficiencies. Where a collaboration is expected to generate environmental benefits, that would appear to be a relevant factor that could and should be considered in an SLPC assessment, particularly if it may result in innovation, new products or services, or other non-price benefits to customers.
If the three pre-requisites are established, the Competition Bureau has the discretion to issue a certificate and to establish the associated duration and terms.
While a certificate “may” (rather than “shall”) be issued, enforcement and administrative discretion must be exercised in accordance with a legislative framework that includes the “purpose” clause in the Competition Act and Parliament’s decision to establish the environmental certificates regime to encourage non-anticompetitive collaborations undertaken for the purpose of environmental protection.
The stated purpose of the Competition Act is to:
to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.
Depending on the circumstances, competitor collaborations for environmental purposes may promote the adaptability of the Canadian economy, expand opportunities for the collaborating firms to expand into international markets, increase opportunities for SMEs to participate in markets in Canada, and generate additional product choices for consumers. While providing consumers with competitive prices is certainly an important purpose, a narrow focus only on price effects would be inconsistent with a purposive interpretation of the environmental certificates provision in the context of the broad and multi-faceted purposes of the Competition Act.
Two additional important elements of the Competition Bureau’s discretion are: the duration for which the certificate will be valid, and any terms that may be imposed as a condition of granting the certificate.
The Competition Bureau may issue a certificate for a period of up to ten years, with potential renewals for one or more additional periods of up to ten years each. This framework appropriately allows for the possibility of long-term protection in situations where the agreement may involve capital investments that will need to be recouped over an extended period or where there are other ongoing collaboration requirements. Shorter periods can be used for agreements with shorter return on investment or collaboration time horizons. In practice, the Competition Bureau will likely want the parties to the agreement to provide a justification for the requested period of protection that is tailored to the nature and expected duration of the agreement.
Terms. The Competition Bureau has the ability to impose any terms that it considers appropriate when issuing a certificate. Such terms could include prohibitions against certain types of activity (e.g., excluding new entrants from participating in an industry-wide standard, exchanges of competitively sensitive information, etc.) as well as mandatory requirements (e.g., non-discrimination provisions or monitoring/reporting requirements). This power is somewhat analogous to the Competition Bureau’s ability to negotiate consent agreements to resolve issues arising under the merger, unilateral conduct, and competitor agreement provisions of the Competition Act. In practice, it should be expected that the parties and the Competition Bureau would discuss any concerns arising from the review of a certificate application and seek to agree upon workable terms to address any SLPC concerns before an application is approved or rejected.
The Competition Bureau has issued “FAQs” about the 2024 amendments that confirm and elaborate on the key elements of the environmental certificate application and review processes and provide helpful guidance for industry players.
The Competition Bureau has indicated that applications should include complete descriptions of the proposed agreement (as well as a copy of such agreement), the parties and their affiliates, the business rationale, and how the agreement will protect the environment. In addition, the market information that is requested to facilitate the SLPC analysis includes information about products and services relevant to the proposed agreement, including their uses or purposes, applicable regulatory frameworks, IP rights, lists of complements and substitutes, areas of actual or potential competitive overlaps, and market share information. In practice, this is somewhat similar to information typically provided in applications for advance ruling certificates related to proposed M&A transactions.
The Competition Bureau also requests a description of “why the proposed collaboration is necessary to protect the environment, including any alternatives that have been explored and why they are not suitable.” However, such information is not relevant to the assessment of whether the purpose of the agreement is to protect the environment. It also is not relevant to an SLPC analysis. As a result, such information (or a decision not to provide it) is unlikely to be a proper basis for the Competition Bureau to decline to issue a certificate.
The Competition Bureau will likely contact market participants to obtain additional factual input and explore possible competition concerns (as it does in many merger reviews and non-merger investigations). Applicants for a certificate may also be requested to provide relevant documents and data, and/or to participate in potential interviews. Once an application has been submitted, the parties must provide any additional information requested by the Competition Bureau. While the Competition Bureau has one opportunity within thirty days after a merger notification is complete to issue a compulsory “Supplementary Information Request,” it is unclear whether it can require the applicants for an environmental certificate to respond to multiple information requests as a review progresses.
Confidentiality. Information provided by the parties will have the standard confidentiality protections that exist under the Competition Act. However, the Competition Bureau will be allowed to use any information it obtains for the administration and enforcement of the Competition Act, regardless of whether a certificate is issued or refused.
The Competition Bureau is required to consider any request for a certificate “as soon as practicable.” This differs from the binding written opinion regime in the Competition Act, where the Competition Bureau “may” provide a written opinion for the applicant’s guidance. While the environmental certificate provisions provide an important guarantee that requests will be given prompt attention, the time required to complete an assessment could vary significantly depending on the complexity of the issues, the information gathering required, and the potential involvement of economic or industry experts.
Unlike advance ruling certificates for mergers or binding advisory opinions, no application fee has been established for environmental certificates. As a result, there are also no “service standards” for environmental certificate requests. For mergers, the Competition Bureau has non-binding service standards (fourteen days for non-complex cases, and either forty-five days or thirty days after complete responses to a Supplementary Information Request for complex cases). The “as soon as practicable” standard for environmental certificates suggests that it would be reasonable to expect the Competition Bureau to work towards similar timelines, since some competitor agreements may have similar complexity but they are unlikely to be more complex to analyze than mergers.
If the Competition Bureau issues a certificate, it must be filed with the Competition Tribunal for immediate registration. The certificate will be publicly available and must contain the names of the parties, a description of the agreement for which the certificate is being granted, and the terms and duration established by the Competition Bureau.
There are four circumstances in which an environmental certificate can be rescinded or varied prior to its stated duration.
If an agreement is terminated by the parties, they are required to notify the Competition Bureau and the Competition Tribunal within fifteen days, and the Tribunal must rescind the certificate. If the parties fail to do so, the Competition Bureau can have the certificate rescinded.
Non-Compliance. The Competition Bureau and the parties to the agreement, as well as any third parties who are directly and substantially affected “in the whole or part of their business,” can seek rescission or variation of a certificate by the Competition Tribunal if the agreement is not being implemented in accordance with the description in the certificate or if the parties have failed to comply with the terms of the certificate.
Anticompetitive Effects. The Competition Bureau and the parties to an agreement, as well as affected third parties, may also seek a variation or rescission if the agreement is, or is likely to, result in an SLPC in a market. This provision introduces potentially problematic uncertainty for parties who may make significant investments in reliance on an environmental certificate. They theoretically could find—potentially well into the collaboration—that the Competition Bureau changes its position or that third parties seek to second-guess the Competition Bureau’s decision to issue a certificate.
Consent from the Commissioner. The parties to the agreement, with the Commissioner’s consent, may vary the arrangement to which the certificate applies. This provision provides the flexibility to allow for adjustments if there are significant changes in circumstances over the duration of a certificate.
As a practical matter, the Competition Bureau has a very strong reputation for not reneging on enforcement decisions after a substantive review is conducted (e.g., it does not revisit mergers that have been consummated on the basis of a non-binding “no action letter” absent incomplete or misleading disclosure by the merging parties during the review process). A third party would need to show that they are directly and substantially affected by the agreement in order to challenge a certificate. In addition, the Competition Bureau or a third party would have to persuade the Tribunal on a balance of probabilities that an SLPC is occurring or would be likely to occur, despite the Competition Bureau’s initial assessment to the contrary.
For rescission or variation of Tribunal consent agreements or orders, there is a pre-requisite that “the circumstances that led to making the agreement or order have changed and, in the circumstances that exist at the time that the application to rescind or vary is made, the agreement or order would not have been made or would have been ineffective in achieving its intended purpose” (or that the Commissioner and the person have consented to a rescission or variation). This may be a useful benchmark for the Competition Bureau and the Tribunal to consider when deciding whether a rescission or variation should be granted.
The effect of a rescission or variation is prospective. The protections provided by a certificate (discussed in more detail below) will apply so long as the certificate is in effect, even if the terms may change. Changing the terms may be fairer and preferable to rescission if revised terms that would eliminate the SLPC can be found.
The issuance of a certificate prevents the Competition Bureau and private parties from challenging an agreement under the core provisions of the Competition Act dealing with competitor collaborations:
The competitor agreements provision was extended by the recent amendments to also apply to any agreements (including between parties that are competitors) if a significant purpose of the agreement is to prevent or lessen competition substantially. An environmental certificate can protect non-competitors (e.g. a vertical agreement between one or more suppliers and one or more customers), if the Competition Bureau accepts that an SLPC would be unlikely notwithstanding a significant anti-competitive purpose. However, such a certificate would not immunize against challenges under abuse of dominance, price maintenance, refusal to supply or other non-horizontal reviewable practices.
In the absence of an environmental certificate, many types of bona fide environmental collaborations could potentially be subject to challenge if they directly or indirectly affect prices, output, or other significant dimensions of competition. Moreover, the risks of strategic private litigation being used to attack environmental collaborations are increasing. For example, several major U.S. banks including Bank of America, Citibank, and Morgan Stanley have opted to leave the Net-Zero Banking Alliance at least in part due to antitrust litigation risks. An environmental certificate would insulate alliances that do not undermine competition from the chilling effects of such litigation threats in Canada.
The Competition Bureau argued during the amendments process that (i) the ancillary restraints defense to the conspiracy offense, (ii) the Competitor Collaboration Guidelines (“CCGs”) that describe Competition Bureau enforcement practices, (iii) the ability of parties to self-assess, and (iv) the option of requesting a binding advisory opinion from the Commissioner, rendered the environmental certificates regime unnecessary. However, the Canadian Government and Parliament correctly realized that parties seeking to enter beneficial environmental collaborations face potentially significant uncertainty and chilling effects in relation to both Competition Bureau enforcement and private litigation initiated by third parties that are not fully addressed by the foregoing mechanisms.
Notwithstanding the Competition Bureau’s views, competitors considering collaboration on environmental initiatives face potentially significant uncertainty about the risk of enforcement action by the Competition Bureau:
The private right of action to recover damages for breaches of the conspiracy offense is regularly used by an active plaintiff class action bar to bring cases involving a wide range of competitor conduct that may implicate prices, supply to particular customers or markets, and/or the supply of products and services. The Competition Bureau’s enforcement guidelines and binding advisory opinions do not constrain such private litigation risks.
Until 2024, there was no private right of action related to the non-criminal competitor agreements provision. However, private parties can now seek leave from the Tribunal to enforce this provision directly if all or part of their business is substantially affected. In addition, leave can be sought where an application would be in the public interest, which will provide consumer, environmental, and other organizations with opportunities to initiate litigation related to the competitive effects of environmental agreements. They can seek the same remedies as the Competition Bureau, including broad mandatory remedial orders and/or the imposition of an AMP.
In addition, beginning in June 2025, private parties can request that the Tribunal order the parties to an anticompetitive agreement to pay an amount up to the entirety of the benefits derived from such an agreement, which may be distributed by the Tribunal amongst affected parties as it sees fit. This effectively appears to be a type of disgorgement remedy which will incentivize more private litigation. The potential exposure for parties to an agreement may be very large, depending on how this provision is interpreted and applied.
Environmental certificates provide the participants to an environmental agreement with an up-front mechanism to eliminate the uncertainties associated with potential Competition Bureau enforcement as well as private litigation. Even if a self-assessment indicates that conduct is likely to be found by a court or the Competition Tribunal to be lawful, it may very well be sensible to obtain a certificate when considering modest risks of a negative outcome as well as the costs and risks of investigations and/or litigation and the related reputational impacts. Such a certificate will provide certainty for the parties to the agreement, as well as third parties that may transact with the parties to the agreement, ultimately fostering investment and collaboration in relation to environmental initiatives.
The contributions of Claire Lingley, an associate at McMillan LLP in Vancouver, are gratefully acknowledged.
