Author: Anna Okorokov
Starting June 20, 2025, Canada is giving its citizens a new tool to fight greenwashing. Private individuals and organizations will be able to challenge misleading environmental claims before the Competition Tribunal (the “Tribunal“) and Canadian federal court. In 2024, Canada amended its Competition Act (the “Act”) to include greenwashing provisions.
Previously, only the Competition Bureau of Canada (the “Bureau“) could prosecute for violations of the Act. June 20th will mark a pivotal shift with new private enforcement mechanisms.
What’s Changing?
There are two specific provisions companies must pay attention to, both of which are currently in force in Section 74.01(1) of the Act. The first applies to product specific claims and prohibits representations which:
“(b.1) makes a representation to the public in the form of a statement, warranty or guarantee of 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, the proof of which lies on the person making the representation;“
The second provision applies to businesses and their activities, prohibiting representations which:
“(b.2) makes a representation to the public with respect to 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, the proof of which lies on the person making the representation;“
Important terms to note in the above include:
- Adequate and proper test
- Internationally recognized methodologies
In December 2024, the Bureau released draft guidance which addresses both terms and how they will be interpreted in the context of environmental claims. The guidance clarifies that the enforcement of the provisions will be in respect of marketing and promotional representations. With respect to the “adequate and proper testing” requirement, it will be looked at in a context specific method, with reference to the existing body of case law. The guidance provides that the test must be ““fit, apt, suitable or as required by the circumstances”.
With respect to the “international recognized methodology”, the Bureau will consider this satisfied if the methodology is recognized in two or more countries. However, the substantiation under the methodology must be adequate and proper. The Act currently allows for limited private rights of action before the Tribunal, as set out in Section 103.1. What’s changing is, effective June 20, 2025, section 103.1 will be expanded to allow a private person to file an application under the expanded anti-greenwashing provisions in Section 74.1. It is crucial to note that the private right of action will be subject to a significant constraint – leave to file the application must be first granted by the Tribunal. Previously, private access was limited to provisions involving refusal to deal, price maintenance exclusive dealing, tied selling and marketing restriction, and abuse of dominance.
What Does This Mean for Businesses?
It is the responsibility of the entity that made those representations to prove that the representations were made in compliance with the Act. Put plainly, if a business is going to make environmental claims, it must have the evidence to back up that claim.
Corporations must now ensure that any environmental claims—whether in advertising, product labeling, or sustainability reports—are substantiated with evidence derived from adequate and proper testing, utilizing internationally recognized methodologies.
Penalties
The Tribunal may impose significant administrative monetary penalties for violations.
- For Corporations: The greater of $10 million (increasing to $15 million for subsequent orders) or three times the value of the benefit derived from the deceptive conduct, or 3% of the corporation’s annual worldwide gross revenues.
- For Individuals: The greater of $750,000 (increasing to $1 million for subsequent orders) or three times the value of the benefit derived from the deceptive conduct.
In addition:
- An Order to cease the impugned conduct
- Payment of restitution to affected persons
- An Order to publish a corrective notice
These penalties underscore the importance of transparency and accuracy in environmental representations.
Preparing for the Change
To mitigate risk and ensure compliance, companies should:
- Review and substantiate environmental claims: Ensure all environmental representations are backed by evidence.
- Implement internal controls: Establish robust processes for verifying environmental claims and maintaining documentation to support them.
- Monitor public communications: Regularly audit marketing materials, product labels, and sustainability reports to ensure consistency and accuracy in environmental messaging.
- Engage with legal counsel: Consult with legal experts to assess current practices and develop strategies to align with the new legal requirements.
Conclusion
The amendments to the Competition Act represent a significant shift in Canada’s approach to greenwashing, empowering private parties to take action against misleading environmental claims. Businesses must proactively review and substantiate their environmental representations to mitigate legal risks and maintain consumer trust. The time to act is now—ensure your marketing materials, reports and other publications do not make unsubstantiated claims.
For more detailed guidance on compliance strategies and risk mitigation reach out to us at WRD LLP.