How recent amendments to the Competition Act raise the stakes for environmental claims

[AUDIO LOGO] RENÉ BISSONNETTE: All right. Thank you everybody showed up this morning. Really appreciate you coming out. This is going to be a great panel today. This isn't going to be an endpoint. As you probably all aware environmental claims has been a bit of a shifting landscape. And we expect that will continue throughout the year.

We're going to have a new private right of action come into force shortly. We are still waiting for the final guidance from the Bureau. So this is not an endpoint, as I said, this is just going to tell us where we're at today so that we can prepare for what's ahead. So we're going to try and run through this quickly. I know we're all very busy. But as I said, we have a very interesting topic and some great speakers today. So without further ado, let's get started.

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In today's world, where environmental consciousness is on the rise, it's more important than ever to be able to distinguish between genuine, eco-friendly efforts and deceptive greenwashing tactics. You've probably heard the term greenwashing thrown around, but do you really know what it means? It's not about taking a bath in nature. Unless you're a bear, then it's just called hygiene.

Greenwashing is far more insidious and can have serious consequences for both the environment and consumer trust. Greenwashing is a deceptive practice used by companies to appear more environmentally friendly than they actually are. It's when companies make misleading, unsupported, or outright false environmental claims about their products or business practices.

It's about using vague and unspecific buzzwords, like sustainable, green, eco-friendly and clean, and not having any data to back it up. It's about painting everything green and creating a green halo effect. Just because a product has green packaging or a leaf logo doesn't mean it's environmentally friendly.

And it's about airlines claiming to fly responsibly when the only truly sustainable way to travel is to walk. Just don't be surprised if mother nature gets a whiff of your carbon footprint. It's also about car companies convincing us to wave goodbye to harmful pollutants and feel guilt free with their zero emission EVs. While electric vehicles are a step in the right direction, they're still a long way from leaving a neutral environmental footprint.

As we navigate this new era where environmental consciousness is front and center, companies across all sectors are feeling the heat to go green, and some companies add they're making eco friendliness look easy. But do their claims reflect reality and can they back them up? That's the multi-million dollar question.

Thankfully, Gowling WLG's team can help you navigate compliance and manage risks. Got questions? We're here to make sure your business doesn't get caught in the weeds because let's face it, greenwashing claims are bad but orange jumpsuits, even worse.

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MELISSA TEHRANI: So not to be overly dramatic, but over the years, we've definitely seen a surge in green marketing, which has obviously led to greenwashing. Well what is greenwashing? Greenwashing is when a company makes unsubstantiated, vague, misleading, and sometimes blatantly false claims about their products, environmental benefits, or the environmental or sustainability efforts that a business may or may not be taking.

And this could include unsubstantiated environmental claims, as well as vague claims or claims that might lead to multiple interpretations. And if a claim can lead to multiple interpretations, then it obviously ultimately could lead to consumer deception.

But green claims can also very much be a double edged sword. Yes, consumers want to hear about what you're doing, but the challenge is that consumers don't really have the ability to personally fact check the environmental claims that you're making the actual environmental benefits of a product. And that's largely because of how difficult it is to actually verify the accuracy of a lot of these very complex environmental claims and issues.

So because of this information imbalance, customers often have no choice but to find themselves at the mercy of businesses and ultimately having to place their trust in what a company is saying about its sustainability efforts, and the benefits of its products. And we know that these issues are really important to consumers. These are very material claims.

And of course, we know that consumers want to know about what you're saying, the efforts that you're making when it comes to environmental claims. And that's more important than ever and there is strong data to support that. 75% of consumers will actually change their purchasing decision based on a company's social responsibility or the actual product's environmental impact. And for Gen Z and millennials, that number actually jumps to 82%

And so the bottom line is environmental claims are very compelling, and businesses know that consumers will pay a premium for them. So if we consider how powerful environmental claims are, but also how inherently not great for the environment most products are, because if you really stop to think about it, when you consider the entire life cycle of a product, from ingredient sourcing to the product's manufacturing to the end of life disposal, well, it's really no surprise that very few products are actually good for the environment.

And so that is why this has become very much a priority enforcement area for the Bureau, and of course, for class Action Council in Canada. But before we get into the provisions, we thought we'd take a step back and level set on the general rules regarding false and misleading representations, because at its core, that is what greenwashing is. It is a deceptive or misleading representation or form of deceptive representation.

And so the federal Competition Act contains two prohibitions on representations that are false and misleading in a material respect, and that has been interpreted by our courts to mean a misrepresentation that is likely to influence a consumer's behavior or purchasing decision.

And in the world of marketing, literally everything that you see in advertising or on your product packaging and labeling is material. That is really the essence of advertising and marketing law. The marketing dollars are often what steer the ship and drive sales. And so you can take for granted that virtually all of your environmental claims and claims about your sustainability efforts will be material to consumers.

When you're determining whether or not a representation runs the risk of being misleading, you look at the general impression conveyed by the representation, but also its literal meaning. So you want to look at the literal content of the claim. What are we literally saying about our product or our company. And then the general impression that is created by the ad, when you look at the overall context of the claim as well as its visual representations.

So when considered as a whole, what is the general impression, the takeaway for the end consumer and is that accurate? And these factors have to be considered from the perspective of the average consumer. The test is not what impression this claim will have on the careful or diligent consumer or the product planning and specialist folks, but rather the hurried consumer that is credulous and inexperienced.

And that standard was articulated by our Supreme Court in the Richard versus Time case. And so the takeaway here is the general impression needs to be applied-- or that test needs to be applied from the perspective of the average consumer, who is credulous and inexperienced and takes no more than ordinary care to observe that which is staring them in the face upon a first contact with the advertisement.

So again, this is not the consumer who, while walking by your billboard or your store display will take the time to actually read the entire block of fine print that your marketing team and your legal team have worked to craft. And so it's important to keep that very low bar in mind as we go through the new greenwashing provisions.

And when assessing the general impression, again, you really want to look at the overall context created by the claim. The visual representations have to be considered. But what are those elements and why do they matter? So some of those elements are, of course, color. Color and words. Obviously what are we actually literally saying about our product or our company.

But also imagery. So primarily green imagery is also really important because it can benefit from an eco-friendly halo effect in the minds of consumers. So if you think about lush green fields, green leaves, plant graphics, symbols. Those could also potentially imply that a product is third party certified by some form of environmental company. And if that's not the case, then of course, that could lead to a misleading representation.

Another great example would be in the electric car space. So assume you've got an electric car that gets up to 500 kilometers of range on a single charge. That claim is literally true. We have data to support that. Now, suppose you take that claim, and you put it on an ad of a car driving in a very winter landscape on a highway.

Well, that claim then becomes potentially misleading, because the general impression there is that I could get up to 500 of range on a single charge, driving in the middle of Canadian winter on a highway. And we know that the moment the temperature outside drops, and you're on a highway, that that range is significantly impacted. So yes, it's literally true, but typically under ideal driving conditions and not in the middle of winter.

So you do want to keep take a close look at what are you literally saying but also, how is that claim interpreted when you look at the advertisement as a whole. So you want to be mindful of those elements. It's not to say that you can't use them, but you need to be mindful of the impression that they could contribute to build.

So the use of greenery, green imagery might not in and of itself, or on its own be problematic, but as a whole, when you look at other elements, could potentially be a factor among many that could create a misleading representation. So just a few things to consider when you're focusing and looking at the general impression.

CHRISTOPHER OATES: Thanks, Melissa. So the various prohibitions that Melissa was speaking to were under Section 52 and section 74.01 of the Competition Act. Those are long established prohibitions on misrepresentation or false or deceptive claims, including environmental claims. So it's not that with the recent amendments to the Competition Act, environmental claims are suddenly regulated or false or misleading claims are suddenly prohibited in this specific space. We have long standing prohibitions in this area, and long standing law and case law on the point, including in the environmental context.

Historically, and this slide is a little bit of a retrospective as to where we were before we go into where we're going, the Bureau had produced a detailed set of environmental claims guidance in excess of 70 pages. That's notably-- or can be contrasted with the proposed draft guidance we'll speak to in a few moments. And these are still available online despite being retired.

So this document includes detailed information on specific environmental claims and the Bureau's assessment of what one needs to do to meet them. Again, previous guidance that should have been past tense. They contained a lengthy list of international standards and certifications to consider for various claims. They include examples of good and bad claims and the Bureau's assessment of them.

However, in November of 2021, these claims were retired and may not reflect the Bureau's current policies and practices and do not reflect the latest standards and involve environmental concerns. So these are no longer the Bureau's current position, they are archived and available online and continue to provide detailed historical information. In immediately following retiring them actually, the Bureau took a tougher standard than would have been set out under these guidelines.

So it's not as if by retiring the very detailed guidance, the Bureau is taking a step back and relaxing its approach to these claims, rather, it's more likely that they've retired these guidelines, so as not to be bound by them. Typically, we would say that they are still relevant in terms of the wealth of information they provide, contrasted with the lack thereof in the draft guidance we'll speak to shortly.

So I think it's fair to say that you can't ignore these, however, you also can't rely on them. The Bureau can very well take a position that they're no longer adequate. And even if you toe the line with what was their historical guidance, you're no longer compliant with their position or as to what the law actually requires.

Into that broad context, the government amended the Competition Act to introduce two new prohibitions specifically targeting environmental claims, which I will pass the torch to Renee to discuss.

RENÉ BISSONNETTE: Great. Thank you so much, Chris. As Chris said, we had this archived guidance and really didn't have any reliable guidance at the time. And then all of a sudden in June 20, 2024, we were hit with these new amendments to the Competition Act, which explicitly targeted greenwashing. And it really expanded the deceptive marketing provisions related to greenwashing and also expanded the penalties that Ian will talk to in a little bit, again, really changing the landscape and increasing the risk profile associated with these types of claims.

As Chris noted, under the old sort of historical framework, we kind of understood what we were dealing with. We had the broad general prohibition that they spoke to and was basically a linchpin of advertising and marketing law for a very long time. You can't make false or misleading representations.

And we also had this second provision, which is also a core tenet of advertising and marketing laws, that performance claims need to be supported by adequate and proper tests. And these are very long standing principles of advertising law. And we were comfortable with them, despite the fact that we didn't have that real substantive guidance. And then all of a sudden, we had these new prohibitions come in.

Now, the first, again, was a bit of a derivative off of the performance claim prohibition that we had initially. And it essentially says, if you're going to make a environmental claim about a product's benefits, this has to also be supported by adequate and proper tests. And we're a little bit comfortable with that, because during the period where we're between the archive guidance, and after that, we essentially had some communications from the Bureau indicating that they're going to treat environmental claims like performance claims.

So this wasn't too much of a surprise to us. But the second prohibition, which was quite broad and targets business activities and operations and indicated that you had to have adequate and proper substantiation in accordance with an internationally recognized methodology. This was quite new and really shook us up. We really didn't see this coming, and I think for a lot of people, we still struggle with it.

Before we get to that, let's just talk about that first prohibition first. Again, the Bureau indicated that if you're going to make performance claims about a product's benefits, it has to be based on adequate and proper tests. And this is a long standing principle, so no real surprise there. This concept of adequate and proper testing is something that we've dealt with before.

Ideas of this requirement have been around for over 75 years, and the Bureau has provided very substantive guidance about this and there's also good case law on this as well. There's the chatter case, imperial brush case, very seminal cases that say these are the principles underlying this concept. And essentially, these were summarized in the Deceptive Marketing Practices Digest Volume 2.

And basically, as Melissa indicated, first you start with the general impression. What is the claim? What do you need to support? Secondly, your testing needs to be conducted before you make that claim. Make sure that this is prior testing. You can't do the testing afterwards, you need to do it up front. If you say your product does something, do the testing first and make sure it actually does that thing.

So it has to be done under controlled circumstances. So we're kind of getting towards a scientific method here. Subjectivity is eliminated and it's not mere chance. So we're looking at some sort of causality or correlation in order to be able to establish that the consumer is going to obtain that benefit. And finally, ensure that your testing supports the claim being made in the sense that you can't have your testing, and then exaggerate that, or extrapolate it to the point where your claim is overly broad and that your support doesn't underpin it properly.

So again, this adequate and proper test requirement was not too much of a surprise and it's something we knew, and we were comfortable with. But as I said at the outset, this second prohibition was quite new. And the scope of it, first off is quite broad. It's the benefits of a business or a business activity. So just that conceptually, I mean, if you consider the types of claims that that could encompass very, very broad.

And secondly, adequate and proper substantiation in accordance with internationally recognized methodology. That's a lot to tackle right there. And you can break it down into two concepts. Adequate and proper substantiation, number one, and in accordance with an internationally recognized methodology, number two. So there's two concepts there. It's almost a two part test. So you could have adequate and proper substantiation, but if it's not in accordance with an internationally recognized methodology well you're off site.

So this is something that we really struggled with because we had these two new concepts and didn't really know how to deal with them, or how to understand what the substance of them were going to be in practice and in enforcement. And so with this new 2-step requirement, we were really hoping for the Bureau to come in and provide some guidance and help us get comfortable with how they were going to interpret and enforce in this new sort of landscape. And with that, I will hand it over to my colleagues to discuss the new guidance.

CHRISTOPHER OATES: Thanks, René. So unfortunately, the new guidance does not live up to the expectations that René had set for them not five seconds ago. I might comment that they're more notable for what they don't contain rather than what they do. They do not contain detailed compliance guidelines on specific claims.

They do not identify international methodologies by which to test claims, and they do not provide criteria for specific claims or examples of claims that the Bureau finds offside, or that the Bureau thinks may be substantiated, given appropriate evidence. So they don't provide a substantive basis for advertisers to assess their environmental claims in a manner akin to the retired guidelines. So in part, given that we have the wealth of information in the previous guidelines, which again, is no longer considered current or adequate by the Bureau, we do have that as historical reference.

What the new guidelines do do is set out six rather high-level principles, which the Bureau asserts will help businesses assess whether their claims are compliant. However, these in large part restate the prohibition in varying formulations. And again without providing without providing detailed examples of expectations on the part of the Bureau, which leaves advertisers in a little bit of a difficult position, given that we have new, more specific, and in some respects, broader prohibitions than we had historically.

With respect to the specific content of the-- actually, we're going to pass to the-- I might add, before we move on to this slide, that the new guidelines are currently in draft state. So there is room for some amendment. We're not expecting a radical overhaul of them, we think they're relatively close to final. But again, there is a little bit of room for amendments before the Bureau adopts them. And with that, I will pass things to Shannon. Thank you. Oh, it's Julia. Oh.

JULIA KAPPLER: Go into principle?

CHRISTOPHER OATES: This. OK, sure. So for this slide, this one will be very brief. Is there a grace period? No, there is not. The Bureau says they will assess things in the circumstances. That's true. In any event that's how one applies the law. There is a private right of action that's coming.

And the Bureau indicates there is further guidance to come. That is a question mark. We don't have that yet. And there is a due diligence defense.

JULIA KAPPLER: So now, we will move into what these six principles actually say. And as Chris mentioned, unfortunately, we don't have a ton of great new information to give you here, so instead we've decided to include this lovely photo. So principle one environmental claims should be truthful and not false or misleading.

Again, this is nothing we didn't already know, and this isn't specific to environmental claims. What is interesting to look at here, though, is what sort of topics the Bureau chooses to address when covering this principle. So they remind us of a few things to consider when assessing if a claim meets these criteria.

So the first is that claims must be true when assessed in their entirety. So as Melissa mentioned earlier, this means we consider not just the words, but also the imagery, colors, et cetera. So if your claim is made entirely in green text or on a background like this, that could be seen as implying something beyond just what the words actually state. The Bureau also reminds us that the question is not just whether a statement is literally true, but also whether the general impression it conveys is true and not misleading.

So for an example here, if we were to say that a product is made with recycled content, when in reality only a small percentage of the content is recycled, it is literally true that there's recycled content in there, but the general impression that would likely be conveyed here is that most or all of the content making up the good is recycled. And given that that's not the case, this could easily be considered misleading and thus [INAUDIBLE].

Finally, the Bureau cautions that a claim can be misleading by omission. Here, they state that key information must be included quote, "as an integral part of the representation in such a way that it will factor into the general impression." In other words, if a claim would be misleading without certain details or statements, these must be included.

So here, to go back to our recycled content example, if we were to make a claim of made with 100% recycled content, but this would apply only to the product's packaging and not to the actual product that's in this packaging. This claim would be misleading without this detail, so instead we'd have to rephrase to packaging is made with 100% recycled content.

This also means that we can't rely on disclaimers to cure a false or misleading claim. Again, not specific to environmental claims, but the general rule on disclaimers is that they can add context or detail to a claim, but we can't make a claim that's false or misleading, and then use a disclaimer to specify that we actually mean something else.

Move on to principle two. This one states that the environmental benefit of product and performance claims should be adequately and properly tested. For that, I'll pass it over to Shannon.

SHANNON UHERA: Thank you. So to build a little bit further on what René introduced under the revised Competition Act. As noted, there is existing guidance for adequate and proper testing. And that guidance remains relevant for making product and performance environmental claims under the revised act.

But when we're looking at substantiating business and business activity, environmental claims under the revised act, the requirements are definitely far less clear under the guidance that we currently have. Under the language of the act and the draft guidance, first, these claims require adequate and proper substantiation. And it's the substantiation piece that is the newer piece and that we have less clarity on.

So it's not necessarily the same as the adequate and proper testing standard that we're more used to. And the same principles that we use for that standard don't necessarily apply for this substantiation piece. Ultimately, it does remain to be seen how courts will interpret this newer requirement, and also if any further details will be given in the finalized guidance that we received from the Bureau.

But based on what we currently do know we know under the draft guidelines that to meet this requirement, there must be evidence, and that evidence has to be appropriate to the Canadian context. It has to be relevant to the claim that's at hand and also sufficiently rigorous, rigorous to establish the claim.

Second, substantiation must be in accordance with internationally recognized methodology. And as previously touched on, this language is interesting to say the least. What this means is not very clear under the act and the draft guidance that we have. But the draft guidance does provide that this is likely established if methodology that is used is recognized in two or more countries.

The draft guidance also provides that the methodology does not need to be recognized by government, so the guidelines do leave open the door for the guidelines-- or sorry for the methodology being relied on to be recognized by industry. It does not have to be the best methodology available, but it does have to be reputable and robust. So we might say not the worst, but also does not have to be the best either. And does not require compliance with an international standard.

So the revised guidance that we-- sorry the draft guidance that we have, really underscores that it's the methodology itself that matters and it doesn't matter if it's necessarily in a standard or not. So, kind of, building on that a little bit. We might find an international methodology that is within a formal international standard that we're relying on.

Or it might be in government guidance with relevant methodologies that speak to substantiating a particular claim at hand. Similar to what we see in the Canadian draft guidance that goes into pretty sufficient detail, claim by claim on relatively common environmental claims. Or methodologies might be set by industry and third party verification standards that are referenced by those methodologies.

So although there's no clear guidance on what it means for a methodology to be recognized, international methodologies that may be informative as we're working to meet this internationally recognized requirement, it can include those set out in the US Federal Trade Commission, Green Guides, and the UK competition and Markets Authority guidance for making environmental claims.

And of course, we don't have the final guidance to really know exactly what's going to define what this term means, but these two international guidelines might nonetheless be informative. And we've reviewed these guidelines regarding common claims. So for example, claims of being substance-free renewable energy and similar common claims that are reflected in the Canadian archive guidance to understand the methodologies that apply internationally. And where there's overlap both with each other from the UK and the US side, and also overlap with our existing Canadian archive guidance, which as Chris noted earlier, is still very much relevant and instructive to examine as we're making environmental claims.

And through this, notably, there are a lot of similarities between them. And certainly in terms of the methodologies that are required to substantiate certain types of environmental claims. Each of these were developed based on very similar, overarching, misleading advertising requirements. And so that really goes down to the crux and the core of what is ultimately building.

The rationale behind these environmental claims rules are similar in these other two jurisdictions. And also these guidelines were similarly developed taking principles from the same ISO standards for making self-declared environmental claims that the Canadian archived guidance was based on. And so as a result of that, you do see some similarities in the language.

And so while I'm certainly far, far from an expert in US or UK law, as we wait to see what the Bureau's finalized guidelines will set out regarding this internationally recognized methodology standard, we found that these international guidelines could potentially serve as at least a helpful resource in the meantime to align certain environmental claims. I'll turn it back to Julia.

JULIA KAPPLER: Thank you. So on to principle 3 Comparative environmental claims should be specific about what's being compared. So here we often see businesses making vague claims such as better for the planet, less water, fewer emissions, smaller carbon footprint, and things like that without any context as to what the reference points are.

So, for example, if we're saying fewer emissions as compared to what? As compared to our company a year ago, five years ago, as compared to our leading competitor, to any other player in the industry, we need to specify. So again, fairly self-explanatory. The key here, be specific as to what the basis of the comparison is.

Principle 4 is that environmental claims should avoid exaggeration. So this pretty much elaborates on principle 1, which is that we shouldn't be false or misleading. Here, the Bureau doesn't really go into much detail besides stating that a business should not overstate or bolster the environmental benefits of a product or of their business as a whole. So we won't spend much time on this one.

On to principle 5. Environmental claims should be clear and specific, not vague. So this is another one that's pretty frequent. I'm sure we've all seen businesses touting that their products are eco-friendly, sustainable, natural and things like that. There are several problems with claims like this, for example-- first of all, these words are broad, they're general, they're subjective.

There's no clear standard or definition as to what these mean. They're very much open to interpretation, and that creates a problem when it comes to substantiation. How do you substantiate that your product is eco-friendly. If there's no clear criteria on what this means or when you have or haven't met this standard, there's no way to assess whether your substantiation is adequate.

So instead of making claims like this, we should be clear, specific and ideally stage, something that's measurable. So for example, instead of eco-friendly, we could say made with 80% recycled plastic and recyclable where facilities exist or something like that. And now principle 6, I'll turn it over to Chris, which is that environmental claims about the future should be supported by substantiation and a clear plan.

CHRISTOPHER OATES: Thank you. Thank you. Thank you, Julia. So first, as a general observation, I'd note a lot of these principles have been phrased as suggestions. Claim should not be false or misleading. I think it's safe to say you should read a lot of those shoulds as musts, rather than discretionary guidance. With respect to principle 6 and future plans, phrasing your claim as a goal or an aspiration doesn't necessarily render it not misleading.

So a number of panelists today have mentioned sustainability or green or eco-friendly or those kind of buzzwords that advertisers may like but don't really have much content besides literally greenwashing in the case of declaring yourself green. So saying our sustainable products or our sustainable practices can be problematic because the word sustainability is difficult to substantiate. Even under the old guidance, it was criticized.

As I said, the old guidance is retired and the Bureau no longer considers it adequate. That doesn't mean the Bureau suddenly thinks everybody can make sustainable claims, specifically, given the introduction of the new criteria. However, changing our sustainable practices we have embarked on a sustainability journey does not save that claim. It still gives the credulous, inexperienced consumer the impression you are sustainable or that you're working towards this rather nebulous goal.

Other examples of forward-looking claims can have a little bit more content to them. So, for example, we aim to be carbon neutral by 2040. OK, great. What steps are you doing to do that? What does that mean in practice? How far are you along that journey? What milestones have you set along the way?

So really, the Bureau's guidance here is you need to consider whether or not your future statements or forward-looking statements are mere wishful thinking or are concrete, realistic plans backed by a series of steps that are designed and likely to achieve that future state and are, in fact, already underway. So in other words, we're not just setting goals as mere aspirational targets that give us a nice aura or halo of environmental friendliness, but rather are quite literally, we have a plan. We know what the goal is, we know how to get there, and we are implementing steps to do so.

Again, many of these claims, depending on how they're phrased, they could be claims about a product, in which case you're looking at adequate and proper testing. Or they could be claims about a business or business practices, in which case you're looking at adequate and proper testing in accordance with internationally recognized methodology.

The draft guidelines assure us that there is a wealth of information about international methodology out there. It's not to be found in the draft guidelines, but it is there, the Bureau tells us. With that, we will pass to Ian to discuss penalties.

IAN MACDONALD: Thanks. So historically, the Competition Bureau has been able to enforce all aspects of the act, including both the criminal and civil misleading advertising provisions. And as of June 20th the act is being amended to allow private parties the right to seek leave to enforce the civil misleading advertising provisions generally, which include greenwashing, but not just greenwashing.

Historically, private parties have also had the right to take enforcement action, under the criminal misleading advertising provisions. But that's a higher bar because it requires-- conduct that is not done knowingly or recklessly. And so what will happen in under three weeks time is private parties will be able to seek leave to bring greenwashing or any misleading advertising case if it is in the public interest to do so.

So there's a lot-- and part of the reason for this is to foster more enforcement. The Bureau has limited resources. And so minute ago when I said the Bureau has historically been the enforcer, the only enforcer under the civil misleading advertising provisions 74, that requires a bit more explanation, because the Bureau has a lot help.

And that private parties, often competitors, sometimes interest groups, and we've been on both sides of this, will monitor a competitor's activity over a period of time, prepare an extremely detailed dossier of allegedly offside conduct, and hand it to the Bureau and say, here is your case on a silver Platter. Please take it forward. And sometimes the Bureau cannot take every case so the theory here is that more cases will come forward.

But there is a bar. It's not just any case. You have to convince the tribunal, which is a specialized court that is in the public interest, to do so. So that's caused a great deal. Between that, the high penalties, which I'll get to in a second, and this sort of nebulous and generic guidance as to what is or is not offside, there's a lot of angst in the business community as to, can I make any claim at all?

Interestingly, a couple of weeks ago, there was a significant opinion piece in The Globe and Mail by Jennifer Quaid and Julianne Beaulieu. And Julianne was-- I've interviewed him twice in podcasts on green claims. And there are-- we have a link later in this deck that you'll have access to those if you want to go into more detail.

But he at the time was at a lecture at the University of Sherbrooke, now he's a doctoral candidate in the UK. And their title was that Ottawa's anti-greenwashing rules aren't radical, companies are just overreacting. And one of the things that they say, and I don't agree with everything that they say, but just want to give the counter perspective on opening the floodgates of litigation.

Is that private claims will have to be authorized by the tribunal and deemed in the public interest to proceed, a high bar that will deter frivolous lawsuits. Class actions are also unlikely to become frequent, as the law does not provide for a damages regime from which lawyers could be paid.

And so there is understandably a lot of angst, but there's a question mark as to how much the floodgates will open because you have to get through the regulator-- sorry, through the court with establishing a public interest case. Likely sort of larger things of national importance. A lot of people use them. A high volume of commerce at play. And then someone has to fund that case.

So I think in the case of environmental claims, they'll be funders. And interest groups that have a lot of donors, sometimes high net worth people will donate a lot of money to that kind of thing. So they'll likely be funding. But there is still a bar, and that will-- and a self-policing mechanism.

Just by way of context, another area of the act was open to private actions, the abuse of dominance provision about three years ago now. And since then, there have only been two applications. And both of these were in the pharma industry in high volume drugs that involved hundreds of millions or billions of dollars of commerce. And so you could see the rationale for bringing those cases, we were actually on-- we were defending the first one, and it ended at a very short period of time.

So just a small data point. But another area of the act was open three years ago, and there was concerns about the floodgates. We haven't seen a flood, we have seen some. But they have been in cases where there was a huge amount of money at stake, and just bringing those actions would have cost a significant amount. So not a low bar, and some self policing in there.

In terms of the penalties, they can be significant. A lot of attention gets focused on the monetary penalty, which can be $10 million for a first offense, or three times the value of the benefit derived from the conduct of that could not be measured up to three times-- 3% of the corporation's annual gross revenues.

The theory for this-- and this 3% thing was added to a number of sections of the act. The theory behind this was that as high as numbers like 10 million, 15 million, even 25 million can be. Depending on the company involved, there can be a speed bump. And if you do a crass economics, it can actually be better for the company to engage in the conduct until it gets caught and told to stop and pay even a $25 million fine than to just not engage in the conduct at all. So by putting it to 3% of global revenue, the idea is that may have more of a deterrent effect.

And, while a lot of attention gets focused on the administrative monetary penalty or the potential penalty, that's not the only potential remedy. Can also include a cease and desist in order to publish corrective notice, and for transgressions of the general misleading advertising provisions. So not the greenwashing specific substantiations, but the general headline level, the claim is false and misleading. You can also have a restitution.

I just want to speak briefly to cease and desist and corrective notices. Those can be very onerous in terms of implementing. If you have 30 SKUs, statements on packaging that just converting your packaging to a compliant claim can be very expensive, very disruptive, time consuming.

Some of these corrective notices, these are not, a one line, nebulous letter. We might have said something that might not have been 100%-- you negotiate with them, the Bureau, and they're designed to be crystal clear, the conduct was offside. The prior publication in over two dozen newspapers, websites, all the companies social media accounts, emails to customers. So those are not light things either.

In terms of the amount of an app, there, a list of aggravating and mitigating factors that would be taken into account. But basically, the bigger the company, the more egregious the claim, the more commerce involved, the more consumers are eff-- Is this a product that everybody uses like a fossil fuel, or is it a very niche product that only few people use and the companies much smaller those kind of things.

And then there is a potential due diligence defense that if a company establishes that it took reasonable action to exercise due diligence to prevent a misleading claim from being made, then many of the remedies can be taken off the table. You still have a ceasefire and desist order, but no app, no corrective notice or no restitution.

But there's a circularity issue here because you don't want to be relying on the due diligence defense. You want your due diligence to succeed in preventing the claim from being misleading in the first place because there'll be a high degree of skepticism.

This is not a light, well, we asked some low-level manager to do something to make this compliant, and he was asleep at the switch. It would be a much higher bar to succeed. And even then, you'd still have the cease and desist. So it's much better if the diligence succeeds in the first place to prevent a misleading claim.

RENÉ BISSONNETTE: OK, great. So just to summarize very quickly, we had the FDR guidance, which was really our substantive guidance. And that's been archived for many years now. We had new provisions come in last year, and one of them was a little expected. The second one, which had to do with business activities was a little bit more problematic, and we really were looking for the Bureau to provide substantive guidance about how do we support in this new space and this new landscape.

The guidance we received was not substantive at all, as we saw from the principal's very high level. Not much meat there. So still a lot of uncertainty about how to properly support these types of claims. The penalties are high. As Ian noted, we were looking at some pretty significant figures here. And we have this private right of action and we're unclear to the extent to which private litigants are going to take up the competition Bureau's call to action to enforce in this space.

So really, looking ahead, there's a lot to be concerned about and a lot going to happen this year. We have yet to receive the final guidance from the Bureau. And again, that private right of action is coming in in three weeks. So hopefully just in time.

On the US side sort dovetail off of what Shannon said. The FTC Green Guides are obviously going to be an important piece of reference for understanding what internationally recognized methodologies are. And in terms of the FTC's Green Guides, they were last updated in 2012, so over 13 years ago. Now in 2022, the FTC requested comments from industry to say, what do you want to see? What's working, what isn't?

And so that stakeholder consultation period has ended. We're into a new administration, query to what extent the Trump administration is going to make this a priority. Are they really going to want to publish new Green Guides and put more onus on businesses and more regulatory hurdles in front of their commerce? I'll leave that as an open question.

So it's unclear when the new guidance will be published, but it is a possibility. And if it's published, it's something that we will want to keep a very keen eye on because, as I said, understanding what an internationally recognized methodology actually is not a lot of substance in our guidance. And the FTC Green Guides is-- the US example is where we would start for sure. And the next one is a constitutional challenge, which is currently in front of the courts.

MELISSA TEHRANI: Yes. So on this point, I just wanted to quickly mention that the Alberta Enterprise Group, jointly with the independent contractors and business association, did file a constitutional challenge last December. Essentially alleging that the amendments to the Competition Act, the new greenwashing provisions, unjustifiably violate the right to freedom of expression under the Canadian Charter of Rights and Freedoms.

And also that it has a-- will have or has a chilling effect on environmental claims, which dovetails nicely into the next topic, which is greenhushing. So we're seeing both authorities and consumers demanding transparency when it comes to environmental claims. But the lack of prescriptive guidance, coupled with the new greenwashing provisions and, of course, the potential for very significant penalties has many companies feeling kind of uneasy about what they can and cannot say when it comes to their environmental claims and the environmental benefits and activities that their company is undertaking.

And so that sentiment has led to what we call greenhushing. And greenhushing is the opposite of greenwashing. It's when you intentionally shy away or downplay the environmental initiatives and efforts of your company. And that's largely intended to avoid scrutiny and to avoid the liability and concerns related to greenwashing.

Now, minimizing and shying away from making environmental claims might seem like the safe conservative strategy to adopt, but there was a very interesting report that was released recently that paints a very different picture. So in April of this year, INTA published its 2024 presidential task force report, the effect of greenwashing and greenhushing on brand value.

And the report, essentially, examines both misleading environmental claims and the under-reporting of genuine ESG claims and its effect on brand recognition, consumer trust and overall brand value. The report findings were quite interesting. So we've all been so focused on the potential impact of greenwashing on consumer trust and brand value and brand reputation, but little thought has really been given to the effect of greenhushing, and how underreporting of your genuine ESG activities and achievements might actually affect your brand.

So we know that effective ESG communications build consumer trust, but I don't think many of us appreciated that underreporting of ESG messaging and communications not only leads to missed opportunities, but that the cost of inaction in ESG communication actually now significantly outweighs the challenges of action. So I'll pause there for a second.

But among the report's key findings is the concerning evidence that brands are really engaging or missing significant opportunities to convert consumers and enhance their brand value because they're underreporting their ESG activities. So the research cited in the report indicates that over 82% of products lacked clear sustainability messaging, despite a growing consumer demand for such information.

So greenhushing obviously directly undermines the conversion potential of this very growing segment of the population. And not only negatively impacts the brand's reputation, but also its financial performance. And I don't think that's something we fully, really appreciated.

So if there's one takeaway that I took from that report, is that the safe and conservative approach of staying silent might not actually be safe and conservative from a financial perspective. When the brands don't tell their stories, others, including your consumers, will. And in today's climate, silence is not neutral, it actually could be quite financially damaging to a company.

RENÉ BISSONNETTE: All right.

MELISSA TEHRANI: And I guess we'll end on that sort of dramatic note.

RENÉ BISSONNETTE: All right. Well wonderful. So just at this point, we'll just open up the floor to any questions that maybe have in the audience. And of course, if you don't want to say it out loud, you can feel free to email or contact any of us. But yeah, if you have any questions, please feel free to ask them now.

Yeah, I mean I think puffery-- yeah. So the question is, the concept of puffery and to what extent that could be applicable in the context of environmental claims. Yes puffery is broadly, available. But the issue is that puffery, at its core, is essentially a claim that no one would rely on. No reasonable person would take that seriously and would purchase a product on that basis.

So if I had a pair of shoes and said, with these shoes, you can jump over the moon. No one's going to actually think that you're going to put on those shoes and jump over the moon. So your claim effectively has to be meaningless, almost like it's a joke or something that no one could take seriously.

AUDIENCE: Reducing paper-- we're reducing paper to save the environment. Like you're never going to be able to prove that. But is that--

RENÉ BISSONNETTE: Not being able to prove it is different from the one believing you're actually doing something and trying to understand. The vagueness and the broadness of that claim is the issue.

AUDIENCE: Yeah.

RENÉ BISSONNETTE: I think a consumer would potentially rely on that to say, oh, this company is trying to do something good for the environment.

AUDIENCE: That's what I thought.

RENÉ BISSONNETTE: I'm going to support them. So that I don't think is a puffery claim, that is a broad and vague claim, which the principles establish are going to be problematic for you.

AUDIENCE: Exactly. Thank you.

AUDIENCE: I just have some questions on retroactive applicability of the act and also if companies should be looking to put more historical disclaimers on reports. I'm seeing on some company websites, especially oil and gas, that a lot of them are putting these historical disclaimers for previous sustainability reports or things from statements that have been made. Is there any value-- will the Competition Bureau look at that kindly if there's been any discussion about that?

CHRISTOPHER OATES: I'll pick up on that, and then let some of my colleagues speak. But I think there's two different things happening there. The first is historical claims. And I don't think that the new prohibitions that René had spoken to would have retroactive effect to behavior that was truly in the past, prior to the coming into force of those provisions.

However, there's also the question of ongoing behavior or ongoing representations. So if you have historical information or historical material on your website that continues to make broad claims that are offside, I would think that's more likely to be viewed as ongoing behavior or ongoing representations that could be subject to penalties-- which are prohibitions, rather which are now in force.

So in that regard, I do think there may be I'll say some value with the word, some doing an awful lot of work in that sentence. Because as Julia had indicated, disclaimers don't necessarily-- they're not a panacea to saving what's otherwise a false or misleading claim, or one that's overly broad. If anybody else would like to make any observations, I'll--

AUDIENCE: I can just jump in. Effectively, I think depending on whether it's an ongoing claim so I think this wouldn't apply to ongoing but historical claims that may or may not be on your website, I think a lot of it will turn on the language in the disclaimer. And I think we could likely draw inspiration from what the Bureau, the kind of disclaimer they have on their archive guide about how it may no longer reflect their approach, et cetera. I think that's probably a good place to start.

RENÉ BISSONNETTE: Yeah, and a final comment I'll have is that the provisions we're talking about are marketing provisions. And so the concern that the Bureau has indicated is when these claims are made for marketing purposes and they've indicated that if it's not a advertising and marketing type claim or document, that will be relevant to the extent to which they might investigate something.

So you mentioned that these were financial reporting documents or something else like that. I've seen companies go and put a preamble up front and say very clearly, this is not to be relied on by consumers. This has a very specific purpose to it, which is not a marketing purpose. We're reporting for XYZ reason.

So, kind of, trying to give a heads up and even to a regulator or someone else who might be looking at it, that this is not supposed to be caught by these prohibitions. This is not an advertising piece of information. I think that's a smart way to try and mitigate risk there. It's obviously not a get out of jail free card. But it does speak to what the Bureau has said is that they will focus on marketing-type representations.

AUDIENCE: And I'll just add one more thing. To go back to the first part of your question on how this would apply retroactively. In the FAQ section of the draft guidance, the Bureau actually does state that they won't hold anyone liable for violation of the new provisions before these came into effect or were enacted. But they also do warn that there are the old general provisions that apply. So if you're offside, the new ones, you may well have been offside, the old ones as well and those would have applied.

IAN MACDONALD: You [INAUDIBLE] up what I was about to say-- I want to just add on to Rene's-- so thank you. What René said about the reporting. So the whole misleading advertising provision is premised on for promoting a business interest. So if these are required financial reports, I think there's a strong argument that if we were simply complying with another regulation, and we had to report on ESG, that you couldn't get caught in a no win situation by-- you're forced to say something here, and then someone else says, well, you're offside under the Competition Act.

Now to the extent that you're then trying to use what was required more broadly for marketing purposes, such as instead of responding narrowly to the questions that were asked by the regulator, doing something big and bold, and then leaving it in a prominent part of your website forever. Question whether that's merely responding to the other regulation. But I think if it is narrow, I think you're on solid ground.

AUDIENCE: And the same beat as that. So we come from the real estate space. We do an annual report. It's voluntary for private companies to do an annual voluntary sustainability report. What we're noticing in some of our peers are doing is for future-looking claims, so we usually, in the sustainability space, so I come from-- I'm not a lawyer, so forgive me if I'm not using the right terminology here.

But we always say targets. We're target setting our KPIs. Like we talk a lot about our targets. What I'm noticing is a lot of our peers, instead of saying targets, they're now saying forward-looking actions, forward-looking clai-- things like that. And they're putting like a disclaimer in their reports that say any future-looking or forward-looking claims that we're making can be restated in the following reports and such and such.

And so like-- it's not a large section, but it does-- it, sort of, on that same beat that you were talking about, René, about how putting in that claim there. Do you suggest that that is something that we do or we alter the way we approach our targets. And then also, if we're not-- right now, when we write our targets, we're not giving the step by step. We'll say some of those milestones, but we're not going step by step. Do you think that hinders us in any way? There's just--

RENÉ BISSONNETTE: So yeah. First off I've seen that practice before as well. It's almost like when you're providing an investor brief, you're seeing those same type of disclaimers saying, there's many variables that could affect whether or not we hit these. These are not to be relied on. These are forward-looking statements. It's unclear if they're going to materialize.

So some of those, sort of, investment-type disclaimers are now appearing in these environmental claims, forward-looking statements, what we call aspirational claims. So there is guidance about how you support aspirational claims in the draft guidance. And again, it's like you need to have a plan. It needs to have step-by-step on how to get there.

What I do think is required is for you to have a second look at what you're doing, understand the new risk level associated with it, and ensure what you're stating aligned with your risk tolerance. And I think that's what your competitors are doing. They're finding ways to try and get the risk down from what they previously did to what they're comfortable with now, in the new landscape.

So I can't provide you with direct, substantive guidance on what you're doing. But I think there is a requirement to re-examine the risk associated with what your past practices are and ensure that you're comfortable with that going forward.

IAN MACDONALD: Just one thing I would add as well, you mentioned, I think, voluntary disclosure. So I think once you're into something you don't have to do, foundationally, you don't have that protection. This would be a business interest as opposed to a compliance requirement, that you affirmatively say something. So you do want to be very careful.

CHRISTOPHER OATES: Just to pick up on one element there. You had asked about stating your steps or plans or that sort of thing within the claim. I'll give you two contradictory responses to that in a very helpful manner.

So first, while I had indicated there is a need to have concrete plans that are designed and actionable to achieve a aspirational claim, there isn't necessarily a requirement to show your homework. Similar to the adequate and proper testing standard, the requirement is to have that in hand at the time you're making the claim, not necessarily to explain your testing methodology or that thing within a consumer-facing claim.

However, for the contrary portion, in some cases, in some contexts, doing so may help you avoid a vague claim. So as a general matter, specific detailed claims that set out clear numbers, clear standards, clear results are less likely to be vague or misleading than broad, open-ended claims. So things like we're working towards sustainability. What does that mean? We're working to have 50% of our energy come from solar power by 2026. Much more specific, much more actionable and much more easy to assess.

So on one hand, you're not necessarily obligated to show your homework. On the other hand, doing so, in some regards, can help you avoid vague, potentially misleading claims.

JULIA KAPPLER: And just to add quickly on what Chris just mentioned, we have seen a few cases out of the US where aspirational claims like those have been challenged. And what's interesting is that courts will often, in different cases, hold the company to a different standard in terms of what is adequate substantiation.

But in many cases, we've seen courts be pretty demanding in terms of you've said that you have a goal of doing X by 2030 or whatever it may be. Well you can't just have a goal. You have to have actual concrete, actionable steps to reach that goal. You have to be on track. These sort of steps have to make sense. So in many cases, courts are pretty stringent or demanding in terms of what you're actually doing concretely to reach this goal.

MODERATOR: Yes. So I think the main takeaway there is you need to have a plan. This is probably a good time to take a closer look at that plan, make sure that you've got a clear, concrete, actionable plan. But most importantly, that you're actually taking action on that plan. Do you have any other questions? All right. Well, thank you all very much for coming and we hope you enjoyed our session this morning.

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