Certain amendments to the Competition Act came into effect on June 20, 2025. These amendments allow a “person granted leave” to apply to the Competition Tribunal (the “Tribunal”) for leave to seek a court order under section 74.1 of the Competition Act. This includes administrative monetary penalties of up to $10 million for a first order issued against a corporation, and $15 million for any subsequent order. It is likely that such applications will be based on the new provisions governing misleading greenwashing representations (ss. 74.01(1)(b.1) and 74.01(1)(b.2)), which came into effect in 2024.
Any such application must be made to the Tribunal and accompanied by an affidavit setting out supporting facts. The application must be served on the Commissioner of Competition and “any person against whom the order is sought under section 74.1”. The person will have 15 days to submit their written representations. The Tribunal then renders a decision setting out written reasons and may grant leave to make an application under section 74.1 “if it is satisfied that it is in the public interest to do so”.
The amendments that came into force on June 20 are expected to open the way for applications by environmental interest groups. Before June 20, 2025, only the Competition Bureau (the “Bureau”) could ask a court to issue orders regarding alleged infringements of the civil provisions of the Competition Act governing misleading representations, including those involving greenwashing. Note that these amendments do not create a free-standing right of action enabling a private party to claim damages. The terms of an order under section 74.1 (including any orders that impose administrative monetary penalties) must continue to be determined with a view to “promoting conduct by that person that is in conformity with the purposes of [the Act] and not with a view to punishment.”
Obligations under paragraph 74.01(1)(b.1)
This provision applies to environmental claims or representations about a product that is made for the purpose of promoting, “directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever”. The Competition Act stipulates that a product “includes an article and a service”. A service is defined as “a service of any description whether industrial, trade, professional or otherwise”, while an article is defined as “real and personal property of every description”.
In its June 5, 2025 guidelines regarding environmental claims, the Bureau states that to challenge such a claim based on this paragraph, it needs evidence that (a) a representation was made to the public by the business; (b) it was a claim about the environmental benefits of a product; and (c) it was made for the purpose of promoting a product or any business interest. If these elements are established, the business that made the claim will need to show that the claim was based on adequate and proper testing. Note that the Bureau uses the word “business” rather than the word “person”, which appears in the language of paragraph 74.01(1)(b.1).
The Bureau also states that, where no case-law precedent exists, this paragraph is to be interpreted according to the ordinary meaning of the words used in the provision. Note in particular the following comments with respect to key concepts in paragraph 74.01(1)(b.1):
- Benefits: Any specific advantages or favourable attributes.
- Based on: The claim must be supported by adequate and proper testing, which must be conducted before the claim is made.
- Adequate and proper: The Bureau views this as a flexible standard, whose scope depends on the circumstances. In the Bureau’s opinion, whether testing is adequate and proper depends on the general impression that the representation conveys to consumers.
- Testing: The Bureau’s view is that this provision requires actual testing, which has been described as “…a procedure intended to establish the quality, performance or reliability of something.” The Bureau considers that things such as evidence of consumer use over a long period of time, technical books, bulletins and manuals, anecdotal stories and studies or sales of similar products have been found by the courts not to be relevant tests.
In practice, paragraph 74.01(1)(b.1) of the Competition Act imposes the following obligations on businesses with respect to their environmental claims as to the benefits of a product (including a service) made for the purpose of promoting, “directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever”:
- The business must ensure that claims about an environmental benefit are clear, specific and truthful, both in terms of their literal meaning and the general impression that they convey to an average consumer. In the Bureau’s view, vague terms such as “eco-friendly” should be avoided, and the claim must specify whether it applies to all or part of the product.
- The business must ensure that any claim about an environmental benefit includes all the key information required to understand that claim. The business must avoid fine print.
- The business must ensure that claims about an environmental benefit are based on adequate and detailed testing conducted before the claims are made. Such testing should be documented by the business.
- The business must avoid exaggerations in any environmental claims that may fall within the scope of paragraph 74.01(1)(b.1).
Obligations under paragraph 74.01(1)(b.2)
This provision applies to environmental claims or representations “with respect to the benefits of a business or business activity” made for the purpose of promoting, “directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever”. Again, the word “product” includes certain services.
To challenge an environmental claim based on this paragraph, it needs evidence that (a) a representation was made to the public by a business; (b) it was a claim about the environmental benefits of the business or business activity; and (c) it was made for the purpose of promoting a product or any business interest. If these elements are established, the business that made the claim will need to demonstrate that the claim is adequately and properly substantiated in accordance with internationally recognized methodology.
In its June 5, 2025 guidelines regarding environmental claims, the Bureau states that, where no case-law precedent exists, this paragraph is to be interpreted according to the ordinary meaning of the words used in the provision. Note in particular the following comments with respect to key concepts in paragraph 74.01(1)(b.2):
- Business activity: Any activity carried on by a business, including but not limited to manufacturing, transporting, storing, acquiring, or otherwise dealing in articles and services, as well as the raising of funds.
- Adequate and proper: In the Bureau’s view, businesses should choose substantiation that is suitable, appropriate and relevant to the claim, and sufficiently rigorous to establish the claim in question. Often, this will require substantiation that is scientific in nature. Third party verification will be required in circumstances where it is called for by the internationally recognized methodology relied upon for adequate and proper substantiation.
- Substantiation: Establishing by proof or competent evidence. While substantiation does not necessarily involve testing in a lab, businesses should ensure that the methodology selected is suitable for the claim, having regard to all the relevant circumstances.
- Internationally recognized: The Bureau will likely consider a methodology to be internationally recognized if it is recognized in two or more countries. The Bureau is also of the view that the Competition Act does not necessarily require that the methodology be recognized by the governments of two or more countries.
In practice, paragraph 74.01(1)(b.2) of the Competition Act imposes the following obligations on businesses pertaining to the environmental claims that they make in respect of their businesses or business activities for the purpose of promoting, “directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever”:
- The business must ensure that claims about an environmental benefit are clear, specific and truthful, both in terms of their literal meaning and the general impression that they convey to an average consumer. In the Bureau’s view, vague terms such as “eco-friendly” should be avoided, and the claim must specify whether it applies to all or part of a product.
- The business must ensure that any claim about an environmental benefit includes all the key information required to understand that claim. The business should avoid fine print.
- The business must ensure that claims about an environmental benefit are adequately and properly substantiated in accordance with internationally recognized methodology. Such substantiation should be documented by the business.
- The business must avoid exaggerations in any environmental claims that may fall within the scope of paragraph 74.01(1)(b.2).
Mitigation measures
To mitigate the risk that section 74.01 of the Competition Act will be enforced by the Bureau or a third party by way of section 103.1, businesses should consider multiple measures, including implementing an environmental claims compliance program. Having a compliance program is a key plank in mounting a due diligence defence.