In brief

Significant reforms to the Competition Act (the “Act”) introduced in the last two years and culminating in pending amendments introduced last fall represent the most comprehensive changes to the Act in over a decade. In this latest installment of ADvantage, we examine in particular how proposed amendments under Bill C-59, Fall Economic Statement Implementation Act, 2023 (“Bill C-59”) are likely to affect Canadian advertising and marketing practices.¹

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Bill C-59 proposes the following key amendments impacting advertising and marketing:

• Explicitly prohibits product-based environmental claims that are not based on an adequate and proper test.
• Introduces a voluntary certification process to immunize prohibited environmental collaborations and agreements (including marketing-related collaborations).
• Creates a new right of private access to the Canadian Competition Tribunal (the “Tribunal”) for deceptive marketing practices.
• Introduces steep monetary penalties for failure to comply with consent agreements related to deceptive marketing practices. 

Although Bill C-59 is expected to pass, the amendments could be subject to further change as the bill advances through the parliamentary process. 

In depth

Advertising and marketing in Canada is primarily regulated under the Act’s civil and criminal deceptive marketing provisions, including broad prohibitions against false or misleading representations, as well as more specific rules pertaining to the use of tests and testimonials, performance claims, drip pricing, misleading warranties, bait and switch selling, sales above an advertised price, ordinary selling prices, and promotional contests, to name a few. 

The proposed amendments introduced by Bill C-59 seek to add to this list and are examined in more detail below.

New prohibition against deceptive greenwashing practices2: Product-based environmental claims

While misleading environmental claims (so-called “greenwashing” claims) are already generally prohibited under the general deceptive marketing provisions of the Act, Bill C-59 introduces an explicit provision prohibiting certain types of greenwashing, targeting and facilitating the enforcement of these claims. 

Bill C-59 will explicitly make any representation to the public in the form of a statement, warranty, or guarantee relating to a product’s benefits for “protecting the environment or mitigating the environmental and ecological effects of climate change” that is not based on an adequate and proper test a deceptive marketing practice prohibited under the Act. 

Although not defined in statute, an “adequate and proper test” must generally be suitable to the product, the product’s material features, the performance of the product, the claim being tested, and valid in the market where the claim is made (i.e., Canada or if applicable, specific regions within Canada). Proving the accuracy of the claim lies with the person making the representation. The test must be conducted and documented prior to the claim being made.

The requirement for advertisers to have adequate and proper testing gives insight into how the  Competition Bureau (the “Bureau”) will assess environmental claims made by advertisers. To ensure compliance with this new prohibition, advertisers and businesses should consider the following:

• Ensure that adequate and proper testing is readily available to support the claim prior to making any environmental claim.
• If an environmental claim is not supported by adequate and proper testing conducted in advance of making the claim, advertisers risk being offside the deceptive marketing provisions of the Act, even where a claim is correct.
• Consider what would constitute adequate and proper testing based on the exact nature of the environmental claim and the product. Generally, to be considered adequate and proper, the testing must:
  • Be conducted under controlled circumstances to eliminate external variables.
  • Eliminate subjectivity as much as possible.
  • Reflect the real-world usage of the product.
  • Support the general impression created by the marketing claims. 

The proposed provision will also allow the Commissioner of Competition (the “Commissioner”) to request, from the Tribunal, the Federal Court or the superior court of a province, a binding civil order to address the prohibited conduct where it alleges that a deceptive product-based environmental claim is made. The order may include prohibitions on taking certain actions (e.g., making certain greenwashing claims), imposing requirements to take certain actions (e.g., providing a notice to consumers about the deceptive nature of a claim), or administrative monetary penalties that in a worst case could total up to 3% of worldwide revenues. Importantly, the proposed provision would not establish a criminal offence for greenwashing, as is available for other deceptive marketing practices.  However, greenwashing claims may continue to be subject to criminal sanction under the general deceptive marketing provisions of the Act. 

Historically, greenwashing claims have been challenged primarily by private parties initiating complaints under the Act’s six person complaint mechanism, which forces the Bureau to initiate an inquiry where any six eligible Canadians file a complaint. Utilizing the Act’s six person complaint mechanism for greenwashing claims has become increasingly popular, straining the Bureau’s ability to devote resources to investigate cases based on its enforcement priorities. The introduction of the provision (as well as the new private right of access, further discussed below) signals the Bureau’s intention to tackle greenwashing in a manner other than by the six person complaints mechanism. 

New environmental agreements certification program

Civil competitor collaboration provisions³ under the Act currently permit the Commissioner to seek an order prohibiting agreements or arrangements between competitors in the same market that substantially prevent or lessen competition – a distinct offense from the per se criminal conspiracy (cartel) prohibitions under the Act, which criminalize certain types of conspiracies and agreements between competitors. 

Bill C-59 introduces a mechanism through which parties may apply for a certificate that will immunize environmental agreements or arrangements made for the purpose of protecting the environment from challenge by private parties or the Commissioner under either the criminal conspiracy or the civil competitor collaboration provisions of the Act, provided they do not prevent or substantially lessen competition. 

The proposed certification may provide the opportunity for new joint marketing initiatives to be pursued without the fear of being offside from the Act. For example, co-promotion, sponsorship, or influencer agreements between businesses that have the purpose of “protecting the environment” may be eligible for protection. An eligible co-promotion agreement could include one between two product manufacturers that promotes the environmental-friendliness of particular products (e.g., a new form of non-plastic packaging or a new sustainable raw product sourcing alliance).

Based on the current drafting of Bill C-59, however, existing agreements would not be eligible to apply for a certificate. The certificate would also not immunize environmental agreements or arrangements from challenge under the abuse of dominance provisions of the Act⁴, limiting its usefulness for businesses and in particular businesses that are dominant in a market. 

Additionally, the proposed amendment does not define “purpose of protecting the environment”, so there is uncertainty around the types of agreements or arrangements that would be eligible for the certificate. Clarification, however, is likely to be included in an updated enforcement guideline published by the Bureau. 

Expanded private access rights

Bill C-59 proposes amendments which, if enacted, would radically change the opportunities and prospects of private actions for civil deceptive marketing practices⁵. Currently, private actions may only be initiated under the following provisions of the Act: refusal to deal, price maintenance, exclusive dealing, tied selling and market restriction, and abuse of dominance. 

If passed, Bill C-59 would now permit, with leave from the Tribunal, private actions for conduct under the civil deceptive marketing provisions of the Act. These could include, among other things, false or misleading representations, claims not based on an adequate and proper test, misleading warranty claims, drip pricing, ordinary selling prices, bargain pricing, bait and switch selling, sale above an advertised price, promotional contests, and the newly introduced greenwashing provisions. Leave may be granted by the Tribunal where it is satisfied that it is in the public interest to do so. This means that under the proposed amendment, businesses may be exposed to greater risk of actions for non-compliant advertising and marketing practices as aggrieved consumers could bring private actions directly before the Tribunal. Businesses should therefore: 

• Closely monitor industry advertising and marketing practices as well as any consumer complaints and trends reported by relevant consumer interest groups.
• Implement and regularly update advertising and marketing policies and internal systems for approving product claims and representations, in particular those relating to the environment, whether on packaging and labelling or in advertising. 
• Ensure advertising and marketing compliance training is being provided to all relevant personnel (including new hires) and offer periodic re-training to existing advertising and marketing teams. 
• Stay up to date on guidance provided by the Bureau and other sector-specific regulators like Health Canada and the Canadian Food Inspection Agency where relevant. 

New monetary penalties for failure to comply with consent agreements 

If a party fails to comply with a consent agreement registered with the Tribunal (whether it is reached with the Commissioner or between parties to a private action), now including agreements related to deceptive marketing practices, it may face monetary penalties as high as CAD 10,000 for each day of non-compliance. 

In determining the fine, the Tribunal will consider: the person’s financial position; the person’s history of compliance with the Act; the duration of the period of non-compliance; and any other factor the Tribunal considers relevant. 

Businesses subject to a consent agreement in this area should therefore ensure strict compliance, including through compliance training of advertising and marketing teams and recurring audits of marketing and advertising materials.  

Looking forward

While Bill C-59 is still pending approval, other recent amendments to the Act have quickly made their way through the Parliament of Canada and we expect Bill C-59 will be no different. Therefore, while not yet final, advertisers should consider how the proposed amendments may affect their businesses and look out for further communications and updates from us regarding these amendments. 

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1 For further details on the Bill C-59 amendments to Act that create a new quasi-class action regime, see our client alert here. For more information on the drip pricing prohibition recently added to the Act’s deceptive marketing provisions, see our client alert here.

2 For further details on environmental marketing claims, including greenwashing and climate washing, see our client alert, here.

3 For further updates on competitor collaborations introduced by Bill C-56, see our client alert here.

4 For further details on the Bill C-56 and Bill C-59 amendments to Canada’s abuse of dominance regime, see our client alert here.

5 For further details on the amendments to the private access provisions in the Act that are proposed in Bill C-59, see our client alert here.