Amendments to the Competition Act (“Act”) targeting greenwashing are being challenged as contrary to freedom of expression under the Canadian Charter of Rights and Freedoms.

Prior to the 2024 amendments to the Act, the Competition Bureau (“Bureau”) had already intensified its investigations into alleged false or misleading environmental claims, commonly referred to as “greenwashing.” Historically, the Bureau relied on the Act's general prohibition against false or misleading claims to address such issues.

However, the 2024 amendments introduced more targeted anti-greenwashing provisions, equipping the Bureau with enhanced enforcement tools and granting private parties a statutory right of action to pursue greenwashing claims. Even with new tools and provisions, the future of these legislative changes is now less than clear, following a constitutional challenge launched in December 2024.

Summary of amendments

As described in our recent article entitled Competition Bureau launches second consultation on draft environmental claims guidelines, Bill C-59 amends the Act to explicitly target greenwashing by prohibiting representations to the public regarding:

  • A product’s environmental benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change, if those claims are “not based on an adequate and proper test.”
  • 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, if they are “not based on adequate and proper substantiation in accordance with internationally recognized methodology.”

In addition, if the representation is challenged, a “reverse onus” applies that requires the person making the representation to prove that the statements are based on appropriate testing or substantiation in accordance with internationally recognized methodologies.

Bill C-59 also broadens the criteria for granting leave to private parties who wish to commence a Competition Tribunal proceeding or initiate a private action in court concerning a representation of greenwashing. Importantly, it adds a “public interest” criterion for granting leave to private parties, which is likely to expand participation by public interest litigants.

For further information on these recent amendments, see Clearing the air: Canada adopts new greenwashing laws under the Competition Act.

Constitutional challenge

In December 2024, the Alberta Enterprise Group and the Independent Contractors and Businesses Association launched a constitutional challenge in the Court of King’s Bench of Alberta to the above amendments to the Act. In summary, the plaintiffs allege that the amendments:

  • Prohibit environmental claims that are “true, reasonable, or defensible in light of known evidence”, where such claims are nonetheless not based on allegedly vague and uncertain standards such as “adequate and proper test” or “adequate and proper substantiation in accordance with internationally recognized methodology.”
  • Create a “chilling effect” by deterring representations that may nonetheless be lawful.
  • Unequally limit expression by targeting only businesses and industry and not their critics or opponents (e.g. environmental groups).

As such, the plaintiffs allege that the amendments unjustifiably violate the right to freedom of expression under section 2(b) of the Canadian Charter of Rights and Freedoms.

As of the publication date, Canada had yet to file its Statement of Defence in response.

Bureau guidelines regarding environmental claims

The terms “adequate and proper test” and “adequate and proper substantiation in accordance with internationally recognized methodology” are pointedly not defined in the Act. As noted above, this uncertainty is a key component of the plaintiffs’ constitutional challenge. Businesses in Canada also raised concerns regarding this lack of clarity during the Bureau’s recently closed consultation process on forthcoming enforcement guidance.

On December 23, 2024, the Bureau published its highly anticipated draft guidelines regarding environmental claims (“Draft Guidelines”), which are open for public comment until February 28, 2025.

Many businesses and stakeholders will be disappointed to note that the new Draft Guidelines do not include detailed guidance to assist businesses in making compliant environmental claims in a similar fashion to the Bureau’s archived Environmental Claims: A Guide for Industry and Advertisers guidance.

Rather, in addition to limited discussion of certain terms introduced by the 2024 amendments, the Draft Guidelines outline six high-level principles to help businesses assess whether their environmental claims are in line with the requirements of the Act. These principles were first set out in Volume 7 of the Deceptive Marketing Practices Digest published by the Bureau in July 2024, which the Draft Guidelines re-introduce with some modification based on the amended Act.

For further details and commentary on the Draft Guidelines, please see our recent article entitled Competition Bureau launches second consultation on draft environmental claims guidelines.

Conclusion

The risks of alleged greenwashing in Canada have increased in recent years, along with greater uncertainty introduced by the new anti-greenwashing provisions of the Act. This recent constitutional challenge echoes other businesses’ calls for guidance from the Bureau to clarify the new anti-greenwashing provisions and places greater scrutiny on the Bureau’s Draft Guidelines.

Until a court weighs in on the constitutional validity of the Act, these amendments will remain shrouded in an additional layer of uncertainty.

For more information on how to navigate Canada’s new anti-greenwashing regime or for assistance in submitting comments on the Draft Guidelines, please reach out to your Gowling WLG Advertising, Marketing and Product Regulatory, ESG, or Environmental Law counsel.