A New Era of Canadian Green Antitrust

I. Overview: A New, “Greener” Competition Act?

After years of discussion of Canadian competition law reform, the Canadian government has introduced the most comprehensive slate of amendments to Canada’s Competition Act (the “Act”) since 2009. The legislative changes passed in Bills C-56 and C-59 touch on nearly every aspect of competition law in Canada, including deceptive marketing, abuse of dominance, civil anti-competitive collaborations and mergers; expand the private action regime to cover more of the civil conduct provisions in the Act; and introduce new concepts such as drip pricing, “greenwashing”, and an advance certificate framework for environmental agreements into the Act.

These amendments will significantly impact the treatment of sustainability initiatives in Canada, which will be described in more detail herein. However, the use of competition law to address environmental and sustainability concerns is not a new dynamic in Canada. Indeed, this area has been a key enforcement focus for the Competition Bureau (the “Bureau”) even before the amendments. In addition to highlighting the key changes and potential implications for businesses active in Canada on a go-forward basis, we review in this article the Bureau’s history of enforcement action and evolving guidance concerning environmental and sustainability initiatives.

This article will proceed in four parts, each concerning a different aspect of the Act. First, we review the application of the deceptive marketing provisions set out in Part VII.1 of the Act to environmental claims, including the introduction of an explicit “greenwashing” provision and the Bureau’s history of enforcement action to address misleading environmental claims. Next, we discuss the new “advance certificate” provision for environmental agreements set out in section 124.1 of the Act. We then review the implications of the amendments to the general application sections of the Act – including abuse of dominance, civil competitor collaborations and mergers – to environmental agreements. Finally, we assess the newly expanded private action regime in Canada and its potential impact on environmental and sustainability initiatives.

II. Environmental Claims

Companies’ environmental impacts have increasingly been the subject of public and legislative scrutiny. As research demonstrates that consumers are seeking products and brands that are socially and environmentally responsible, many companies have built representations regarding their environmental strategies, performance and targets into public statements (including marketing, advertising, and disclosure materials). However, where companies make statements about the environmental benefits of a product or business interest that may be false or misleading, or that do not have adequate factual support, a practice known as “greenwashing”, they may be at risk of enforcement action under the Act. This section reviews the amendments to the Act that directly concern environmental statements, as well as the Bureau’s past enforcement practice in this area.

A. Deceptive Marketing: Greenwashing and Greenhushing

Even prior to the recent amendments, greenwashing claims have been understood to be covered by the deceptive marketing provisions of the Act. Two general application civil prohibitions relating to deceptive marketing have been particularly important to the historical enforcement of environmental claims in Canada. The first holds that conduct is reviewable where—to advance a product or business interest — a representation is made to the public that is false or misleading in a material respect (“Misleading Claims”). The second holds that conduct is reviewable where a representation is made to the public in the form of a statement, warranty of guarantee of the performance, efficacy or length of life of a product that is not based on adequate and proper testing (“Performance Claims”).

As originally tabled in December 2023, Bill C-59’s amendments to the deceptive marketing provision were intended to clarify that such statements regarding a product’s benefits for protecting the environment or mitigating the environmental or ecological effects of climate change would be assessed the same way as other Performance Claims. However, on March 1, 2024, the Commissioner of Competition (the “Commissioner”) sent a letter to members of the House of Commons Standing Committee on Finance, requesting that legislators strengthen the greenwashing provision introduced by Bill C-59. In particular, the Commissioner urged Parliament to expand the new greenwashing provision to also include claims about a business or brand as a whole as well as to incorporate a reverse onus standard requiring that environmental claims be substantiated prior to being made. The Commissioner’s proposal was ultimately incorporated in the final bill, which upon royal assent created new explicit “greenwashing” provisions.

The new greenwashing provisions explicitly prohibit deceptive environmental claims by forbidding: (i) claims that promote the environmental, social and ecological benefits of using or supplying a product if the claim is not based on an adequate and proper test (a “Product Claim”); and (ii) claims that promote the environmental and ecological benefits of a business or business activity that are not based on adequate and proper substantiation in accordance with internationally recognized methodology (a “Business Claim”). The amendments do not change the application of the general Misleading Claims provision to environmental claims that may be misleading in other respects. In addition to the substantive changes to the law, the amendments also increase the quantum of penalties that are applicable to conduct contravening the deceptive marketing provisions of the Act.

The new Product Claim provisions capture a broader range of statements and representations than the more generic provision on Product Claims set out in s. 74.01(b) of the Act, suggesting a greater regulatory burden for companies that want to promote their efforts to be more environmentally responsible. First, s. 74.01(b) applies only to representations in respect of products, whereas the greenwashing provisions incorporate the concept of a Business Claim relating to “benefits of a business or business activity.” Second, the new provisions refer to the “benefit” of a product or business, which may be interpreted more broadly than the “performance, efficacy or length of life” of a product under s. 74.01(b). While misleading statements relating to businesses, or to “benefits” would have been reviewable under the general Misleading Claims provision prior to the amendments, this provision does not impose the same testing requirements or reverse onus as the Performance Claims provision. Accordingly, post-amendments, both environmental claims relating to specific products or services as well as those relating to the business itself will require substantiation before the representation is made.

While the Act is now clear that all environmental Product Claims and Business Claims must be substantiated prior to making a representation, there remains ambiguity as to the meaning of the terms “adequate and proper test” and “internationally recognized methodology” in the environmental context. Neither term is a defined term under the Act.

The term “adequate and proper test” has been judicially considered and is the subject of substantial guidance from the Bureau under the general Performance Claims provision of the Act. The assessment of whether a given test is “adequate and proper” will depend on “the nature of the representation made and the meaning or impression conveyed by that representation. Subjectivity in the testing should be eliminated as much as possible. The test must establish the effect claimed. The testing need not be as exacting as would be required to publish the test in a scholarly journal. The test should demonstrate that the result claimed is not a chance result.” The test must also be conducted prior to the representation being made.

Accordingly, most of the ambiguity surrounding the substantiation of greenwashing claims will stem from the new requirement that the substantiation be “in accordance with internationally recognized methodology.” In response to public calls for guidance, the Bureau launched a public consultation to gather feedback in July 2024, shortly after Bill C-59 received royal assent. Following the closing of the consultation period on September 27, 2024, the Bureau released draft guidelines addressing Act’s new prohibitions on greenwashing in late December 2024 (the “Draft Guidelines”). In comparison to the Federal Trade Commission’s Green Guide and the Competition & Markets Authority’s Green Claims Code, the Bureau’s Draft Guidelines are far less prescriptive. With a broad and flexible approach, the Bureau retains its ability to assess environmental claims on a case-by-case basis. In so doing, however, the Draft Guidelines inevitably fail to address all of the concerns raised by stakeholders during the consultation period. Nonetheless, the Draft Guidelines do provide some clarity on the “internationally recognized methodologies” requirement. In particular, the Draft Guidelines provide that a methodology that has been recognized in two or more countries will generally be considered by the Bureau to be “internationally recognized”, provided it results in adequate and proper substantiation. The Draft Guidelines note that this does not require that the methodology be recognized by the governments in two or more countries.

Prior to the release of guidance from the Bureau, the June 2024 greenwashing amendments caused concern among the business community that their well-meaning statements may not be in line with the Act. Certain companies reacted to this uncertainty by removing environmental claims from public statements (including marketing content, websites and social media) and securities disclosure, a practice referred to as “greenhushing”. For example, Pathways Alliance removed all content from its website and social media, replacing it with a statement that the measure was due to the uncertainty associated with the impact of Bill C-59 on environmental claims in Canada. The statement from Pathways Alliance said, “[w]ith uncertainty on how the new law will be interpreted and applied, any clarity the Competition Bureau can provide through specific guidance may help direct our communications approach in the future. For now, we have removed content from our website, social media and other public communications. This is a direct consequence of the new legislation and is not related to our belief in the truth and accuracy of our environmental communications.” It remains to be seen whether the Bureau’s new Draft Guidelines will encourage these companies to reissue their environmental disclosures and claims, or whether companies will wait for additional guidance from the Bureau or the Competition Tribunal.

Though there remain questions about the application of the greenwashing amendments – and such questions remain despite further guidance from the Bureau– companies who make environmental claims should be aware of the increased scrutiny such claims are likely to receive, and should make best efforts to appropriately substantiate such claims given the reverse onus that will apply in most cases.

B. Previous Enforcement Action

Canadian companies’ fear of increased enforcement action is not without merit. Even prior to the amendments, misleading environmental claims have been an enforcement priority for the Bureau. The following section summarizes the key cases in Canada that have considered misleading environmental claims.

· ENERGY STAR Spas Cases. From 2009-2011, the Bureau entered into consent agreements with several distributors of hot tubs for alleged claims that their hot tubs were eligible for the ENERGY STAR certification, an international standard for energy efficient and environmentally friendly consumer products. These statements were found to be false or misleading as no hot tubs for sale in Canada were eligible for certification by, or in association with, the ENERGY STAR program. The consent agreements resulted in the imposition of administrative monetary penalties on the companies and/or their owners; required the companies to publish corrective notices in all stores and across their websites, informing customers of the alleged misleading representations; and required the companies to develop corporate compliance programs.

· Volkswagen, Audi and Porsche Diesel Engines. In 2016, the Bureau entered into a consent agreement with Volkswagen Group Canada Inc. (“Volkswagen”) and Audi Canada Inc. (“Audi”), requiring them to pay an administrative monetary penalty of $7.5 million each for allegedly misleading consumers by promoting their 2.0 litre diesel vehicles in Canada as has having clean diesel engines with reduced emissions that were cleaner than an equivalent gasoline engine. A consent agreement between the Bureau, Audi and Volkswagen was also entered into in 2018 for identical alleged conduct, this time accompanied by Porsche Cars Canada, Ltd, relating to the promotion of their 3.0 litre diesel vehicles. The 2018 consent agreement required each party to pay an administrative monetary penalty of $2.5 million.

Immediately following each of these consent agreements, separate class actions were launched by buyers and lessees of 2.0 litre diesel vehicles in 2016 and 3.0 litre diesel vehicles in 2018. Each of these class actions ended in large settlements, providing buyback and restitution payments of up to $2.1 billion for consumers of 2.0 litre diesel vehicles in 2016 and payments of up to $290.5 million for consumers of 3.0 litre diesel vehicles in 2018.

· Recyclability of Keurig K-Cup Pods. In 2022, Keurig Canada Inc. entered into a consent agreement with the Bureau over alleged misleading representations regarding the recyclability of Keurig K-Cup pods. The Bureau’s investigation claimed that Keurig’s instructions allegedly misled consumers by stating that if consumers removed the metallic lid and emptied the pod, K-Cups were recyclable, when this was not the case in every location where the claims were made. As a result, Keurig agreed to pay an administrative monetary penalty of $3 million, as well as $85,000 to cover expenses from the Bureau’s case and donate $800,000 to an environmental charity. The company was also required to complete a number of corrective measures, including: (i) changing its recycling claims and the K-Cup packaging; (ii) publishing notices about the recyclability of K-Cup pods on its websites and social media, to news outlets, on the packaging of new machines, and via email to subscribers; and (iii) improving its corporate compliance program.

A class action settlement was subsequently launched in the United States, wherein Keurig agreed to pay $10 million to affected parties and add language to the packaging of K-Cup pods, indicating that the pods are “not recycled in many communities”.

The introduction of the new greenwashing provisions of the Act, along with the increased penalty amounts, is likely to empower the Bureau to continue its practice of strongly addressing misleading environmental claims.

III. Environmental Collaborations: A Safe Harbour?

The amendments to the Act introduced a new, voluntary pre-approval regime for environmental collaborations, which enables the Commissioner to issue a certificate insulating parties to an agreement from the application of sections 45, 46, 47, and 49 (covering criminal cartel agreements and bid rigging) and 90.1 (covering civil competitor collaborations that harm competition) of the Act where the agreements are found to be for the purpose of protecting the environment, and are not likely to prevent or lessen competition substantially (result in an “SPLC”) in a market.

The certificate must be registered with the Competition Tribunal; must specify a term of validity not to exceed 10 years; and may include any terms that the Commissioner considers appropriate.

Canadian jurisprudence has developed a robust approach to assessing whether an agreement is likely to result in a SPLC, and the Bureau’s limited guidance that has been issued on the advance certificate regime indicates that the Bureau will follow the assessment framework set out in the Competitor Collaboration Guidelines. However, the Act does not define when an agreement is “for the purpose of protecting the environment”. As such, the scope of agreements captured by this provision will largely depend on the Bureau’s interpretation of that term. At the time of writing, the Bureau has not yet issued any guidelines as to how it will consider whether an agreement is “for the purpose of protecting the environment.” Guidance from similarly situated jurisdictions suggests that a broad range of agreements may be considered to be “for the purpose of protecting the environment,” including:

· sustainability standardization agreements (e.g., an agreement between manufacturers to phase out a particular production process which involves the emission of carbon dioxide or an agreement among book publishers to use only recycled paper);

· agreements to develop green solutions (e.g., an agreement to pool funds to support the development of more effective technology to capture and store carbon dioxide); or

· agreements to restrict product or service offerings with the environment in mind (e.g., an agreement between financial service providers not to provide financing or insurance to fossil fuel projects or an agreement among manufacturers and retailers to phase out the production and sale of outdated, energy intensive, washing machines).

While the issuance of a certificate is discretionary, the newly enacted regime requires that the Commissioner consider any request for a certificate as a soon as practicable. The regime also contains provisions concerning extension, recission and variation, and challenge of issued certificates.

Stakeholders in Canada, including the Commissioner, have questioned the purpose and efficacy of the new regime. While the mechanism is designed to shelter anti-competitive agreements from enforcement action under the Act’s civil collaboration and criminal conspiracy provisions, the substantive test for certification as well as the nature of environmental collaborations undermine the practical utility of the new regime.

Unlike the approach developed by competition authorities in the UK and Europe, Canada’s new certification tool does not provide a safe harbour for anti-competitive agreements; rather, it only allows applicants to insulate potentially problematic agreements from enforcement action by proactively demonstrating that they are not likely to result in an SPLC.

By contrast, the legal frameworks adopted in the UK and Europe grant an exemption for agreements that give rise to civil/administrative violations of competition laws, where the impugned agreement produces specified benefits. In the UK, the CMA’s Green Guidance contemplates the possibility of agreements that “restrict competition appreciably but are capable of exemption […] because the benefits of the agreement outweigh the competitive harm.” Provided that the prescribed conditions are satisfied (i.e., the agreement contributes certain benefits; any restrictions of competition within the agreement are indispensable; consumers receive a fair share of the benefits; and the agreement does not eliminate competition), an otherwise anti-competitive agreement could be exempt from antitrust enforcement under the UK’s civil regime. Likewise, the European Commission’s Guidelines provide that sustainability agreements that restrict competition, either by object or by effect, can nonetheless be insulated from enforcement so long as certain conditions, similar to those set out in the CMA’s Green Guidance, are satisfied.

The Canadian government’s unwillingness to follow this approach may be related to skepticism in Canada of the efficiencies defence under sections 90.1 (civil collaborations) and 92 (mergers), which historically excused anticompetitive conduct or mergers where it could be demonstrated that the efficiencies exceeded outweighed the competitive effects. The efficiencies defence was repealed in the same amendments that introduced the advance certificate regime.

However, it is unclear how much the advance certificate mechanism adds to the operation of the Act. For example, the ancillary restraints defence protects agreements that are ancillary to a broader legitimate agreement and are reasonably necessary for achieving the objective of that broader agreement. Parties to an environmental agreement subject to scrutiny under the Act’s criminal conspiracy provision may opt to simply invoke this defence instead of undergoing the time-consuming procedure involved with obtaining a certificate. The Commissioner, in his submission to the Canadian House of Commons Standing Committee on Finance, raised doubts about whether an environmental agreement would fall within the purview of the Act’s criminal conspiracy provisions, which are reserved for addressing “hardcore” conduct: “[i]t seems very unlikely that businesses would have to resort to such conduct to protect the environment.”

Given these concerns, Canada's new certification tool for anti-competitive agreements, while a step towards addressing collaborative efforts in environmental matters, may fall short in incentivizing private entities to participate or engage in an environmental collaboration, in particular with competitors. Unlike the more forgiving frameworks in the UK and Europe, Canada's more rigid approach does not provide a safe harbour for agreements with significant anti-competitive effects from enforcement action, likely limiting its use.

IV. Scrutiny Under Other Provisions of the Act

Amendments to other provisions may also impact how environmental matters are treated under the Act. The broadening of the civil collaboration and abuse of dominance provisions may result in greater scrutiny of arrangements aimed at improving the environment. The expansion of factors under the merger provisions suggest that the Bureau may consider environmental harms and benefits during the course of merger reviews. In this section, we summarize other areas in which recent amendments may impact the assessment of environmental and sustainability initiatives in Canada.

· Civil Collaborations. As previously drafted, the Act’s civil collaboration provision only applied to agreements that include actual or potential competitors (i.e., horizontal agreements). Following the amendments (in force December 15, 2024), both agreements between competitors and agreements between non-competitors (i.e. including vertical agreements) for which “a significant purpose” of “all or any part” of the agreement is to “prevent or lessen competition in any market” may be subject to a Tribunal order. (In each case the applicant must demonstrate that the agreement will result in an SPLC.) The term “significant purpose” is not defined in the Act, though the Bureau’s guidance relating to the revised section 90.1 indicates that the Bureau would likely look to subjective evidence of intent as well as the likely outcome of the behaviour to infer an anti-competitive purpose. Proponents of environmental agreements that may result in competitive effects therefore would act prudently to document the pro-competitive or pro-environmental purpose of the agreement or part of the agreement that could be perceived to be anticompetitive.

· Abuse of Dominance. The amendments revised the substantive test for establishing abuse of dominance under the Act. Previously, both intent (to engage in an anti-competitive act) and effect (substantial prevention or lessening of competition) were required to establish an abuse of dominance. The revised provision sets out a lower threshold, which eliminates the need to prove both anti-competitive intent and anti-competitive effects. The Tribunal may now make a prohibition order where the applicants shows that a dominant firms has either (i) engaged in a practice of anti-competitive acts (i.e., intent) or (ii) engaged in conduct that substantially lessens or prevents competition (i.e., effects). Therefore, the new substantive test could in theory capture any conduct among one or more dominant firms relating to the environment (for example, standard setting used to phase out, withdraw, or replace non-sustainable products) that result in a SPLC, notwithstanding that the conduct is pursued with the intention of protecting the environment.

· Mergers. The Act’s merger provisions have been amended to expressly include new substantive assessment factors under the merger control provisions. While non-exhaustive, the set of factors that the Tribunal may consider during the course of merger reviews has been expanded to now expressly include a transaction’s impact on the labour markets. This suggests an evolution towards a holistic assessment model which may increasingly account for a transaction’s impact on the environment.

V. Expansion of Private Applications for Environmental Conduct

Unlike its neighbors in the U.S., Canada’s competition law regime has limited the ability of private litigants to address anticompetitive conduct. Prior to 2022, Canada’s civil private action regime was only available for conduct falling under the refusal to deal, price maintenance, exclusive dealing, tied selling, and market restriction provisions of the Act. This regime has gone mostly unused, due at least in part to strict leave requirements; rigid substantive tests under these provisions; and the inability for private parties to obtain monetary relief (all of which were intended to avoid perceived excess private litigation and the risk that tactical, opportunistic private actions might ‘chill’ pro-competitive or desirable commercial conduct.

Private parties seeking recourse under the Act were limited to class actions under section 36 of the Act (which is restricted to conduct that violates the criminal provisions of the Act), or, for deceptive marketing, abuse of dominance, or civil competitor collaborations, either informally complaining or making a “six resident complaint” to spur the Commissioner to act. However, the amendments to the Act have expanded the private action regime to cover deceptive marketing, abuse of dominance, and civil agreements that harm competition, as well as implementing increased administrative monetary penalties and disgorgement remedies to incentivize “private attorneys general” to address anticompetitive conduct under the Act.

A. A New Leave Test and Additional Incentives

The amendments’ revision of the leave test for private actions under the Act removes a significant barrier to private enforcement. Prior to the amendments, to grant leave to a private applicant, the Tribunal would have to find that the applicant’s business was “directly and substantially affected by the conduct in question.” This has been interpreted by the Tribunal to require the entirety of the applicant’s business to be directly and substantially affected, not just part of the business.

Following the amendments, private applicants will only have to satisfy the Tribunal that part of their business is directly and substantially affected by conduct falling under the refusal to deal, price maintenance, exclusive dealing, tied selling, and market restriction, abuse of dominance, and civil anti-competitive conduct provisions of the Act. The Tribunal may also grant leave for conduct falling under these provisions where it finds that it is in the “public interest” to do so. Potential disgorgement damages for these provisions will also be available beginning June 20, 2025 for private applications, up to the value of the benefit derived from the conduct. Private leave applications for deceptive marketing conduct, including greenwashing, will only have one test for granting leave—that the Tribunal to find it in the “public interest” to do so—and there will be no damages available.

The introduction of a public interest leave test is novel in Canadian competition law, and the state of the law will likely not be considered settled until it has been tested at the Tribunal. The Tribunal may take inspiration from the public interest leave test that is used to determine standing in constitutional challenges and other public law cases. This test has three prongs that ask: (i) does the claim raise a serious justiciable issue; (ii) does the party have a genuine interest or stake in the matter; and (iii) is this suit a reasonable and effective means to bring the claim forward? However, it is likely that a workable test will have to modify this standard, to ensure that it is sufficiently distinct from the “directly and substantially affected” prong of the leave test and that it does not undermine the Commissioner’s own public interest mandate.

As of November 2024, the Tribunal has not received an application for a private action concerning environmental issues. However, a number of environmental groups have made use of the above-noted “six-resident complaint” mechanism to bring environmental concerns to the Commissioner’s attention. The availability of public interest standing to address environmental concerns may prove attractive to environmental groups looking to advance a green enforcement agenda.

VI. Conclusion: Greener On the Other Side?

It is clear that environmental and sustainability issues are covered by Canada’s Competition Act and the amendments passed from 2022-2024 provide additional tools for assessing potential concerns. However, as at this writing, the amendments create more questions than answers. It will only be after additional guidance is issued by both the Competition Bureau and the courts that whether the amendments have made the “grass greener” for the promotion of environmental initiatives clear.