Competition and Antitrust Law

Overview

Lavery is a firm of choice in the area of competition and antitrust law. We have long been recognized for our expertise in class actions instituted under the Competition Act. In addition, we are the only major law firm in Montréal with expertise in criminal and penal law – a significant advantage when defending clients subject to investigations or legal proceedings involving possible infringements of the Competition Act that could lead to heavy fines or a prison sentence.

If your corporation is majority owned by foreign interests, we can assist you with the acquisition of companies or assets or the establishment of a new business in Canada. 

If you wish to conclude agreements with suppliers, distributors, or clients, we can advise you on various aspects of the Competition Act, particularly with regard to illegal business practices and the abuse of a dominant position. With the assistance of our team of consumer law experts, we can advise you on the provisions of the Competition Act regarding false or misleading advertising. We can also help you file a complaint with the Competition Bureau or initiate legal proceedings against a third party or competitor engaged in unfair competition.

Services

  • Private actions and class actions
  • Defence in criminal prosecutions
  • Draft and review distribution and supply contracts and strategic alliance agreements
  • Advise clients respecting advertising and marketing
  • Opinions and proceedings before the Competition Bureau and the Competition Tribunal regarding mergers, acquisitions, and joint ventures
  • Requests for investigations, complaints, and negotiations with the Competition Bureau
  • Foreign investment in Canada

Representative mandates

  • Counsel for Volailles Inc. and Volailles Acadia Inc. (poultry suppliers) in a suit filed against them by Nadeau Poultry Farm Ltd. (slaughterhouse) before the Competition Tribunal and regarding the appeals to the Federal Court of Appeal and the Supreme Court of Canada
  • Represention of Toyota Canada Inc. and 37 of its dealers in the Montréal area in the Superior Court and the Court of Appeal in a class action commenced under the Competition Act with regard to the Toyota Access program
  • Acted in a suit in the name of Québec City against a “snow cartel”
  • Defense against a class action concerning dynamic random access memory (DRAM) – NEC
  • Counsel for Labatt Breweries in an investigation by the Competition Bureau regarding the maintenance of the price of beer in the Sherbrooke region
  • Notice of mergers and other proceedings with the Competition Bureau in the context of mergers and acquisitions
  • Representation of companies in voluntary filings and orders for the production of documents in the context of proposed mergers
  • Complaints to the Competition Bureau regarding illegal business practices, including one leading to the imposition of a fine by the Competition Bureau of $3,5 million
  1. U.S. Tariffs Announcement: Repercussions and Trade Strategies for Our Quebec Businesses

    Nearly four years after the coming into force of the Canada-United States-Mexico Agreement (“CUSMA” or the “Agreement”), U.S. President-elect Donald Trump announced on November 25 that he intends to implement a 25% tariff on all products entering the United States from Canada and Mexico, starting on the first day of his presidency, January 20. Donald Trump indicated that this tariff will remain in place until Canada and Mexico bolster their border policies, which he believes are responsible for the increase in illegal immigration and the trafficking of devastating drugs in the United States. As a reminder, CUSMA currently provides for tariff-free access to U.S. markets as far as most Canadian and Quebec products are concerned. Hence, although these still remain speculations, and no details were provided by the president-elect concerning this aspect in his announcement, several legislative authorities appear to exist on which his future administration could rely to implement such a measure. It could, among other things, invoke the essential security interests exception in CUSMA, which allows a party to the Agreement to apply any measure that it considers necessary with respect to the protection of its own essential security interests, the national security exception contained in the Trade Expansion Act of 1962, on which President Trump’s first administration had based itself in 2018 to introduce tariffs on U.S. imports of certain steel and aluminum products, or the provisions of the National Emergencies Act. The announcement sent shockwaves through the political and business communities in Canada and Quebec — and understandably so, given the close commercial ties the United States has with Canada, including Quebec. Indeed, alone in the first quarter of 2024, Quebec’s merchandise exports to the United States totalled C$21.2 billion, representing nearly 74.6% of the province’s international merchandise exports, making the United States Quebec’s main trading partner worldwide. Thus, the imposition of a 25% tariff would have a considerable impact on our businesses, which depend heavily on the U.S. market to export their products, which products would be made less competitive on that market. Such a measure could be particularly detrimental to the Canadian forestry industry, softwood lumber already being hit hard by tariffs of nearly 15% as it is. The impact of this protectionist tariff on the U.S. economy would also be considerable. While in the short term it could benefit certain domestic manufacturers and producers, in the longer term it would be likely to harm the U.S. economy as a whole due to higher input costs for many U.S. manufacturers and the disruption of established supply chains, notably in the automotive and steel industries. Hence, to maintain their profitability, many U.S. businesses could be forced to pass on these additional costs to their end consumers by raising the price of their products, which would undeniably lead to another wave of inflation, not to mention the potential retaliatory measures that the Canadian government might want to put in place in response to such a tariff and which could affect certain spheres of the U.S. economy. Although dispute resolution mechanisms are provided for in CUSMA, they are unlikely in the short term to lessen the potential impact of the measures being considered by the Trump administration, as a final decision under these mechanisms can take a long time. The November 25 announcement could also serve as a lever for the new U.S. administration in future negotiations on the renewal of CUSMA, for which preparatory discussions will begin next year, or in negotiations for a separate free trade agreement between the United States and Canada that would exclude Mexico. Canadian businesses would also be well advised to encourage the various trade associations they are members of to undertake lobbying efforts both with U.S. decision-makers and with their corporate customers in the United States in order to expose the adverse impacts that the announced tariff is likely to have on U.S. businesses. Pending a more detailed announcement, including as concerns any specific tariff exemptions, businesses should pay extra attention to their choice of future trading partners. In an increasingly protectionist global economic context, a trading partner diversification strategy is the best defence a business can have to mitigate the risks associated with a particular country’s tariff policies. The Comprehensive Economic and Trade Agreement signed by Canada and the European Union in 2017 — in the negotiation of which our firm was involved — may prove an interesting solution in this regard. Our team of professionals in commercial and tax law is available to help you navigate the issues raised by this announcement. We will put our expertise at your service to support you in your commercial negotiations and develop strategies designed to mitigate the impact that the announced tariff increase could have on your business.  

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  2. Environmental claims about a product, a service or business activities: stricter rules to combat greenwashing

    Greenwashing is a form of marketing that misrepresents a product, service or practice as having positive environmental effects,1 thereby misleading consumers and preventing them from making an informed purchasing decision.2 Several initiatives have been launched around the world to counter this practice. In California, a law requires business entities to disclose information in support of environmental claims.3 In France, ads featuring environmental claims such as “carbon-neutral” and “net zero” must include a quick response (QR) code that links to the studies and data supporting such claims.4 Within the European Union, a proposal for a directive was published with a view to possibly banning generic terms like “environmentally friendly.”5 In South Korea, the Korea Fair Trade Commission proposed an amendment to its Guidelines for Review of Environment-Related Labeling and Advertising that would simplify the process of issuing fines to businesses engaged in greenwashing.6 The Parliament of Canada seemingly followed suit by tabling Bill C-597 on November 30, 2023, which introduces a provision into the Competition Act8aimed at improving the means to fight greenwashing. Amended on May 28, 2024, Bill C-59 finally received royal assent on June 20, 2024, date on which it partially came into force. Because the provision will apply to “any person,” all businesses will be subject to it, regardless of their size or legal form. Amendments to the Competition Act regarding environmental claims The Competition Act now allows9 the Commissioner of the Competition Bureau (the “Bureau”) to inquire into10 the conduct of a person who promotes 1) a product by making an environmental claim or warranty11 or 2) any business interest by making representations about the environmental benefits of a business or business activity. Claim concerning a product or service Insofar as a business or person is unable to demonstrate a product’s benefits for protecting the environment or mitigating the environmental and ecological effects of climate change, the Commissioner of Competition will be entitled to apply to a court for an order requiring such business or person to (i)cease promoting the product on the basis of a non-compliant environmental claim or warranty, (ii)publish a corrective notice and (iii)pay an administrative monetary penalty12 of up to, for a legal person, the greater of $10 million and three times the value of the benefit derived from the deceptive conduct, or, if that amount cannot be reasonably determined, 3% of the legal person’s annual worldwide gross revenue. The penalty for each subsequent offence could be as high as $15 million. A “product” within the meaning of the Competition Act may be an article (real or personal property of every description) or a service.13 This new provision expressly requires any person or business to base their environmental claims on “an adequate and proper test”.14 A “test” within the meaning of this Act consists in an analysis, verification or assessment intended to demonstrate the result or alleged effect of a product. It does not necessarily have to be a scientific method nor do the results need to meet a test of certainty, as the courts have generally interpreted the term “proper” to mean fit, apt, suitable or as required by the circumstances.15 With regard to misleading claims, the courts16 have clarified the nature of the criteria that must be considered to determine whether a particular test is “adequate and proper.” Thus, an adequate and proper test depends on the claim made as understood by the common person. The test must also meet the following criteria: It must be reflective of the risk or harm which the product is designed to prevent or assist in preventing. It must be done under controlled circumstances or in conditions which exclude external variables or take account in a measurable way for such variables. It must be conducted on more than one independent sample wherever possible (e.g., destruction testing may be an exception). The results need not be measured against a test of certainty, but must be reasonable given the nature of the harm at issue and establish that it is the product itself which causes the desired effect in a material manner. It must be performed regardless of the size of the seller’s organization or the anticipated volume of sales.17 Representations accompanying product that come from a person outside Canada are deemed to be made by the person who imports the product into Canada.18 General claims about a company’s activities While Bill C-59 was initially intended to cover only environmental statements, warranties or guarantees regarding products, the assented version of the bill provides that any representation made regarding 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 are subject to a Bureau inquiry.19 As an example cited by the Bureau, a company’s claims about being “carbon neutral” or that it commits to becoming so within a certain number of years20 would constitute “representations of the benefits of a business or business activity in mitigating the causes of climate change.” The company making such claims must be able to demonstrate that they are based on “adequate and proper substantiation” obtained using an “internationally recognized methodology”.21 The Competition Act does not specify which internationally recognized methods may be used for this purpose. Should the substantiation the company uses be inadequate, improper or obtained using a method that is not recognized internationally, it will be subject to the same consequences as those mentioned in the previous section.22 Regardless of whether the claims concern a product or service or a business activity, the persons concerned are allowed to defend themselves under the Competition Act by establishing that they exercised due diligence.23 What impact will these amendments really have? Notwithstanding the proposed legislative amendment, the Competition Act already covers false or misleading representations with respect to green advertising.24 The current provisions already prohibit making representations to the public that are false or misleading in a material respect.25 In recent years, several complaints of greenwashing have been lodged with the Bureau on that basis, prompting it to open a number of investigations. Some have led to major settlements involving companies having made representations regarding their products.26/27/28/29 In all of these cases, the heavy burden of establishing that the business’s environmental claim was false or misleading fell on the Bureau. The proposed amendments to the Competition Act would change this by shifting the burden of proof onto businesses. The onus would therefore be on them to demonstrate that their product benefits the environment in some way or mitigates the environmental and ecological effects of climate change or that its claims are based on adequate and proper substantiation obtained using an internationally recognized method. These new legislative provisions now confirm what was already a general standard since 1999, and they ease the Bureau’s burden of proof. In addition to the Competition Act, other laws applicable in Quebec provide a general framework for greenwashing, such as the Consumer Protection Act.30Under this Act, no merchant, manufacturer or advertiser may, by any means whatsoever, make false or misleading claims to a consumer, which implicitly includes greenwashing.31 To determine whether a representation constitutes a prohibited practice, the general impression it gives, and, as the case may be, the literal meaning of the terms used therein must be taken into account. In particular, it is prohibited to falsely ascribe particular advantages to a product or service, or to claim that a product has a particular feature or ascribe certain characteristics of performance to it.33 Offences are subject to criminal34 and civil35 penalties. Private remedies Another new measure to combat greenwashing in the Competition Act is the possibility for any person (individual, organization, competitor, etc.) to apply directly to the Competition Tribunal for an order against a business making environmental claims or representations about a product, service or activities without adequate substantiation.36 In the first version of Bill C-59, only the Commissioner of Competition could institute such proceedings before the Tribunal.37 However, the Competition Tribunal must first give leave to make such an application.38 The Tribunal’s power to give leave is largely discretionary, meaning that the Tribunal may grant it if it deems that it is in the public interest to do so.39 This new measure will come into force in one year on June 20, 2025.40 Best practices It is crucial for a company to adopt and display a realistic image of its environmental impact based on credible data and facts. Making sure that claims are legally compliant is not all that’s at stake. A business’s failure to do the above is likely to seriously harm not only its reputation, but also its relationship with its stakeholders. Thus, before claiming to be “green,” businesses must consider the following questions. Are the real motivations behind the business’s sustainability commitments clear, legitimate and convincing? Is sustainable development an integral part of the business strategy? Is it applied when addressing key business issues and taking new actions? Does the company have a sustainable development policy that is credible and based on relevant issues? Was it developed collaboratively with and approved by its Board of Directors? Has the company set specific, clear, measurable and achievable objectives and targets? Considerations for public companies As concerns public companies subject to continuous disclosure obligations under Canadian securities legislation (“reporting issuers”), these considerations are set against a backdrop of increasing pressure from investors, including institutional investors, and others for greater transparency on climate-related issues. Although climate-related disclosure requirements for Canadian reporting issuers are still relatively limited, many issuers choose to voluntarily disclose such information, for example in sustainability reports. Reporting issuers must pay particular attention to their communications, which could constitute greenwashing within the meaning of the Competition Act and give rise to the penalties and other consequences mentioned above. This is another risk to add to reporting issuers’ liability in the secondary market for misrepresentation and failure to make disclosures within prescribed time limits. As far as climate issues are concerned, the risk arises in particular from overestimating or inadequately disclosing how activities contribute to protecting the environment or how they mitigate the environmental and ecological effects of climate change. The current move towards standardized methodologies and frameworks and the forthcoming adoption of binding rules on climate-related disclosures should help to limit greenwashing in this context. In the meantime, reporting issuers can reduce the risk of greenwashing by following a well-established international methodology and by including disclaimers for forward-looking statements adapted to the risks and uncertainties inherent to the climate-related information they provide. Conclusion The new provisions of the Competition Act are already having an impact. As a precaution, some companies have removed ads, promotional documents and websites containing claims that certain activities were undertaken specifically to mitigate the causes of climate change. Parliament’s message could not be clearer: Shifting the burden of proof onto businesses means closing the door on an era when products, services and business activities could be marketed as green in the absence of tangible evidence. Definition of the Autorité des marchés financiers: 8 questions and answers about carbon credits and related concepts | AMF (lautorite.qc.ca). Definition of the Competition Bureau: Environmental claims and greenwashing (canada.ca). Assembly Bill No. 1305: Voluntary carbon market disclosures, California, 2023. Read it here: Bill Text – AB-1305 Voluntary carbon market disclosures. Décret no 2022-539 du 13 avril 2022 relatif à la compensation carbone et aux allégations de neutralité carbone dans la publicité, Journal officiel de la République française, 2022. Read it here: Légifrance – Publications officielles – Journal officiel – JORF n° 0088 du 14/04/2022 (legifrance.gouv.fr). Proposal for a Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information, Council of the European Union, Brussels, 2022. Read it here: pdf(europa.eu). Read it here: KFTC Proposes Amendment to Review Guidelines Regarding Greenwashing – Kim & Chang (kimchang.com). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada. The Bill is currently at second reading in the House of Commons. R.S.C. 1985, c. C-34. These provisions came into force on June 20, 2024. This power to make inquiry would be available, as the Competition Act already provides, upon receipt of a complaint signed by six persons who are not less than 18 years of age or in any situation where the Commissioner has reason to believe that a person has contravened section 74.01 of the Competition Act (see R.S.C. 1985, c. C-34, ss. 9 and 10). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 236. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada; section 236 of this Act adds paragraphs b.1 and b.2 to subsection 74.01(1) of the Competition Act. Competition Act, R.S.C. 1985, c. C-34, article 74.1. Competition Act, R.S.C. 1985, c. C-34, subsection 2(1). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, para. 236(1). Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 CACT 2, paras. 122 et seq. Competition Act, R.S.C. 1985, c. C-34, section 74.09: “courts” means the Competition Tribunal, the Federal Court and the superior court of a province. The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 CACT 2. Competition Act, R.S.C. 1985, c. C-34, subsections 74.03(1) and (2). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 236. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada; paragraph b.2 of section 74.01 of the Competition Act was added by amendment adopted on May 28, 2024. Letter from Anthony Durocher and Bradley Callaghan to the Honourable Pamela Wallin dated May 31, 2024. Read it here: BANC_Follow-up_CompetitionBureau_e.pdf (sencanada.ca). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 236. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada. Competition Act, R.S.C. 1985, c. C-34, article 74.1. Competition Act, subsection 74.1(3). Louis-Philippe Lampron, “L’encadrement juridique de la publicité écologique fausse ou trompeuse au Canada : une nécessité pour la réalisation du potentiel de la consommation écologique?” Revue de Droit de l’Université de Sherbrooke, Vol. 35, No. 2, 2005, p. 474. Read it here: A:\lampron.wpd (usherbrooke.ca). Competition Act, R.S.C. 1985, c. C-34, paragraph 74.01(1)(a). Amanda Stephenson, Des groupes écologistes misent sur la Loi sur la concurrence(Environmental groups banking on the Competition Act), October 1, 2023, La Presse. Read it here: Des groupes écologistes misent sur la Loi sur la concurrence | La Presse. Brenna Owen, Un groupe accuse Lululemon d’« écoblanchiment » et demande une enquête (A group accuses Lululemon of “greenwashing” and calls for an investigation) February 13, 2024, La Presse. Read it here: Un groupe accuse Lululemon d’« écoblanchiment » et demande une enquête | La Presse. Martin Vallières, “Gare aux tromperies écologiques” (Beware of greenwashing), January 26, 2022, La Presse. Read it here: Écoblanchiment | Gare aux tromperies écologiques | La Presse; Keurig Canada to pay $3 million penalty to settle Competition Bureau’s concerns over coffee pod recycling claims – Canada.ca. The Commissioner of Competition v. Volkswagen Group Canada Inc. and Audi Canada Inc., 2018 Competition Tribunal 13. Consumer Protection Act, CQLR c. P-40.1, ss. 219, 220 and 221. Definition of the Competition Bureau: Environmental claims and greenwashing (canada.ca). Richard v. Time Inc., 2012 SCC 8, paras. 46 to 57. Consumer Protection Act, CQLR c. P-40.1, ss. 220 and 221. Consumer Protection Act, CQLR c P-40.1, ss. 277 to 279: Fines range from $600 to $15 000 in the case of a natural person and $2 000 to $100 000 in the case of a legal person. Offenders convicted a second time are liable to fines twice as high as those prescribed. Id. at ss. 271 to 276: Consumers may request that the contract be annulled, that the merchant’s obligation be performed or that their obligation be reduced, among other things. For civil matters only; An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, subsection 254(1). See subsection 103.1(1) of the Competition Act, R.S.C. 1985, c. C-34, effective before June 20, 2024. An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, subsection 254(1). Id. at 254(4). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 272.

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  3. Is the proposed amendment to the Competition Act to combat greenwashing really a step forward?

    Greenwashing is a form of marketing that misrepresents a product, service or practice as having positive environmental effects,1 thereby misleading consumers and preventing them from making an informed purchasing decision.2 Several initiatives have been launched around the world to counter this practice. In California, a law requires business entities to disclose information in support of environmental claims.3 In France, ads featuring environmental claims such as “carbon-neutral” and “net zero” must include a quick response (QR) code that links to the studies and data supporting such claims.4 Within the European Union, a proposal for a directive was published with a view to possibly banning generic terms like “environmentally friendly.”5 In South Korea, the Korea Fair Trade Commission proposed an amendment to its Guidelines for Review of Environment-Related Labeling and Advertising that would simplify the process of issuing fines to businesses engaged in greenwashing.6 The Parliament of Canada seemingly followed suit by tabling Bill C-59,7 which, if enacted, will introduce a provision into the Competition Act8 aimed at improving the means to fight greenwashing. Because the provision will apply to “any person,” all businesses will be subject to it, regardless of their size or legal form. Amendment to the Competition Act The proposed legislative amendment would allow the Commissioner of the Competition Bureau (the “Bureau”) to assess9 the conduct of any person promoting a product using an environmental claim or warranty.10 Insofar as a business or person is unable to demonstrate a product’s benefits for protecting the environment or mitigating the environmental and ecological effects of climate change, the Commissioner of Competition will be entitled to apply to a court for an order requiring such business or person to (i)cease promoting the product on the basis of a non-compliant environmental claim or warranty, (ii)publish a corrective notice and (iii)pay an administrative monetary penalty11 of up to, for a legal person, the greater of $10 million and three times the value of the benefit derived from the deceptive conduct, or, if that amount cannot be reasonably determined, 3% of the legal person’s annual worldwide gross revenue. The penalty for each subsequent offence could be as high as $15 million. A “product” within the meaning of the Competition Act may be an article (real or personal property of every description) or a service.12 Moreover, where a false or misleading claim relates to a material aspect likely to play a role in the process of purchasing a product or service covered by such claim, and where the claim was made knowingly or recklessly, criminal proceedings may be instituted.13 This new provision expressly requires any person or business to base their environmental claims on “an adequate and proper test”.14 A “test” within the meaning of this Act consists in an analysis, verification or assessment intended to demonstrate the result or alleged effect of a product. It does not necessarily have to be a scientific method nor do the results need to meet a test of certainty, as the courts have generally interpreted the term “proper” to mean fit, apt, suitable or as required by the circumstances.15 Regarding misleading claims, the courts16 have clarified the nature of the criteria that must be considered to determine whether a particular test is “adequate and proper.” Thus, an adequate and proper test depends on the claim made as understood by the common person. The test must also meet the following criteria: It must be reflective of the risk or harm which the product is designed to prevent or assist in preventing. It must be done under controlled circumstances or in conditions which exclude external variables or take account in a measurable way for such variables. It must be conducted on more than one independent sample wherever possible (e.g., destruction testing may be an exception). The results need not be measured against a test of certainty, but must be reasonable given the nature of the harm at issue and establish that it is the product itself which causes the desired effect in a material manner. It must be performed regardless of the size of the seller’s organization or the anticipated volume of sales.17   What impact will this amendment really have? Notwithstanding the proposed legislative amendment, the Competition Act already covers false or misleading representations with respect to green advertising.18 The current provisions already prohibit making representations to the public that are false or misleading in a material respect.19 In recent years, several complaints of greenwashing have been filed with the Bureau on this basis, and the Bureau has opened several investigations. The Bureau's investigations have led to significant settlements with regard to certain companies that have made representations in connection with their products20/21/22/23. The most recent complaints include one against Pathways Alliance, a group of six fossil fuel companies that ran a huge advertising campaign on the industry’s net zero targets, and another against Lululemon. Bureau investigations have led to substantial settlements, including with Keurig Canada, which agreed to pay a $3 million fine further to a Bureau investigation determining that the company had deceptively advertised its single-use K-pods as recyclable, and Volkswagen, which agreed to pay $2.1 billion for promoting certain vehicles equipped with “clean diesel engines with reduced emissions that were cleaner than an equivalent gasoline engine sold in Canada”. In all of these cases, the heavy burden of establishing that the business’s environmental claim was false or misleading fell on the Bureau. The proposed amendment to the Competition Act would change this by shifting the burden of proof onto businesses. The onus would therefore be on them to demonstrate that their product benefits the environment in some way or mitigates the environmental and ecological effects of climate change. It appears that the proposed amendment will confirm, in a specific legislative provision, what was already a general standard since 1999, while easing the Bureau’s burden of proof. In addition to the Competition Act, other laws applicable in Quebec provide a general framework for greenwashing, such as the Consumer Protection Act.24 Under this Act, no merchant, manufacturer or advertiser may, by any means whatsoever, make false or misleading claims to a consumer, which implicitly includes greenwashing.25 To determine whether a representation constitutes a prohibited practice, the general impression it gives, and, as the case may be, the literal meaning of the terms used therein must be taken into account.26 In particular, it is prohibited to falsely ascribe particular advantages to a product or service, or to claim that a product has a particular feature or ascribe certain characteristics of performance to it.27 Offences are subject to criminal28 and civil29 penalties. Best practices Regardless of whether the legislative amendment outlined here does eventually come into force, businesses must develop and convey an image of their environmental impact that is realistic and backed by credible data and facts. Making sure that claims are legally compliant is not all that’s at stake. A business’s failure to do the above is likely to seriously harm not only its reputation, but also its relationship with its stakeholders. Thus, before claiming to be “green,” businesses must consider the following questions. Are the real motivations behind the business’s sustainability commitments clear, legitimate and convincing? Is sustainable development an integral part of the business strategy? Is it applied when addressing key business issues and taking new actions? Does the company have a sustainable development policy that is credible and based on relevant issues? Was it developed collaboratively with and approved by its Board of Directors? Has the company set specific, clear, measurable and achievable objectives and targets?   Conclusion Parliament’s message could not be clearer: Shifting the burden of proof onto businesses means the end of an era when products could be marketed as green in the absence of tangible evidence. Definition of the Autorité des marchés financiers: 8 questions and answers about carbon credits and related concepts | AMF (lautorite.qc.ca) Definition of the Competition Bureau: Environmental claims and greenwashing (canada.ca) Assembly Bill No. 1305: Voluntary carbon market disclosures, California, 2023. Read it here: Bill Text – AB-1305 Voluntary carbon market disclosures Décret no 2022-539 du 13 avril 2022 relatif à la compensation carbone et aux allégations de neutralité carbone dans la publicité, Journal officiel de la République française, 2022. Read it here: Légifrance – Publications officielles – Journal officiel – JORF n° 0088 du 14/04/2022 (legifrance.gouv.fr) Proposal for a Directive of the European Parliament and of the Council amending Directives 2005/29/EC and 2011/83/EU as regards empowering consumers for the green transition through better protection against unfair practices and better information, Council of the European Union, Brussels, 2022. Read it here: pdf (europa.eu) KFTC Proposes Amendment to Review Guidelines Regarding Greenwashing – Kim & Chang (kimchang.com). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada. The Bill is currently at second reading in the House of Commons. R.S.C. 1985, c. C-34. This power to make inquiry would be available, as the Act already provides, upon receipt of a complaint signed by six persons who are not less than 18 years of age, or in any situation where the Commissioner has reason to believe that a person has contravened section 74.01 of the Act (see R.S.C. 1985, c. C-34, ss. 9 and 10). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, section 236. Read it here: Government Bill (House of Commons) C-59 (44-1) – First Reading – Fall Economic Statement Implementation Act, 2023 – Parliament of Canada; section 236 of this Act adds a paragraph (b.1) to subsection 74.01(1) of the Competition Act Competition Act, R.S.C. 1985, c. C-34, para. 74.1. and Penalties and remedies for non-compliance (canada.ca). Competition Act, R.S.C. 1985, c. C-34, para. 2(1). Competition Act, R.S.C. 1985, c. C-34, para. 52(1). An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, 44th Parliament, 1st Session, para. 236(1). The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 CACT 2, para. 122 et seq. The Competition Tribunal, the Federal Court and the superior court of a province, Competition Act, R.S.C. 1985, c. C-34, s. 74.09: “courts” means the Competition Tribunal, the Federal Court and the superior court of a province. The Commissioner of Competition v. Imperial Brush Co. Ltd. and Kel Kem Ltd. (c.o.b. as Imperial Manufacturing Group), 2008 CACT 2. Louis-Philippe Lampron, “L’encadrement juridique de la publicité écologique fausse ou trompeuse au Canada : une nécessité pour la réalisation du potentiel de la consommation écologique?” Revue de Droit de l’Université de Sherbrooke, Vol. 35, No. 2, 2005, p. 474. Read it here: A:\lampron.wpd (usherbrooke.ca). R.S.C. 1985, c. C-34, s. 74.01(a). Amanda Stephenson, Des groupes écologistes misent sur la Loi sur la concurrence (Environmental groups banking on the Competition Act), October 1, 2023, La Presse. Read it here: Des groupes écologistes misent sur la Loi sur la concurrence | La Presse. Brenna Owen, Un groupe accuse Lululemon d’« écoblanchiment » et demande une enquête (A group accuses Lululemon of “greenwashing” and calls for an investigation) February 13, 2024, La Presse. Read it here: Un groupe accuse Lululemon d’« écoblanchiment » et demande une enquête | La Presse Martin Vallières, “Gare aux tromperies écologiques” (Beware of greenwashing), January 26, 2022, La Presse. Read it here: Écoblanchiment | Gare aux tromperies écologiques | La Presse; Keurig Canada to pay $3 million penalty to settle Competition Bureau’s concerns over coffee pod recycling claims – Canada.ca. The Commissioner of Competition v. Volkswagen Group Canada Inc. and Audi Canada Inc., 2018 Competition Tribunal 13. Consumer Protection Act, CQLR c. P-40.1, ss. 219, 220 and 221 Definition of the Competition Bureau: Environmental claims and greenwashing (canada.ca) Richard v. Time Inc., 2012 SCC 8, paras. 46 to 57. Consumer Protection Act, CQLR c. P-40.1, ss. 220 and 221. Consumer Protection Act, CQLR c P-40.1, ss. 277 to 279: Fines range from $600 to $15,000 in the case of a natural person and $2,000 to $100,000 in the case of a legal person. Offenders convicted a second time are liable to fines twice as high as those prescribed. Id., ss. 271 to 276: Consumers may request that the contract be annulled, that the merchant’s obligation be performed or that their obligation be reduced, among other things.

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  4. Deceptive Online Marketing Practices: Intermediaries, what is your legal exposure?

    In recent decades, online advertising has become the single most efficient and interactive way to reach consumers and assess their behaviour. While television and print audiences continue to dwindle and overall marketing strategies that focus on these mediums are less able to effectively measure and assess performance, online advertising targets a growing market whose technological medium allows for the direct measurement of a marketing campaign’s success. These changes in the marketing world, exciting and new as they may be, pose an important set of legal risks. In using and displaying online ads, merchants and intermediaries should be wary of consumer protection and competition laws, both provincial and federal, so as to avoid unpleasant surprises in the form of pricy sanctions and lawsuits. The law may not have evolved as much as the technologies, but its broad language can adapt to the modern reality so as to protect those who receive the merchant’s new messages. The two main types of online marketing are Search Engine Marketing (“SEM”) and Social Media Marketing (“SMM”). Search engine companies index website content to organize and present the available information in an understandable format. Merchants offering products at retail can present themselves on top of these rankings, targeting specific keywords consumers search for. SMM is a form of display advertising that allows advertisers to present their services in an engaging manner on various popular social media platforms. This targeted conversation with consumers increases brand awareness and provides insights and feedback. Both SEM and SMM represent advertising formats governed by law. Provincial legislation The Consumer Protection Act1 of Québec (“CPA”) regulates and governs advertising activities in the Province of Québec. Namely, the CPA prohibits false or misleading advertising. The provisions of the CPA are aimed at both the merchants and the actors of the advertising industry. The CPA indicates that “no merchant, manufacturer or advertiser may, by any means whatever, make false or misleading representations to a consumer.”2 This prohibition applies to all media including print, radio and television, the Internet being no exception. The Province also enacted the Act to establish a legal framework for information technology3 (“LCCJIT”), in force since 2001, which provides for the liability of online intermediaries such as search engines and website hosts, in a context that is not specific to advertising. Indeed, Justice Rochon in the Court of Appeal case of Prud’homme c. Rawdon4 explains that while “a contributory fault may be committed by third parties who communicate, broadcast, or host the information [...] sections 22, 26, 36 and 37 of the Act to establish a legal framework for information technology (R.S.Q., c. C-1.1) appear [...] to reduce if not remove certain third parties from any liability.” Section 22 establishes that a non-search engine host will be exempt from liability unless it has knowledge that the information it stores is being used for illegal activity or if it does not promptly act to impede access to such illegal documentation. Similarly, a search engine will be liable if it has knowledge that the service it provides enables illegal activity and if it does not promptly cease to provide such a service to the people it knows are engaged in that activity. Either way, the determining factor is knowledge. Section 27 of this same Act states that: A service provider, acting as an intermediary, that provides communication network services or who stores or transmits technology-based documents on a communication network is not required to monitor the information communicated on the network or contained in the documents or to identify circumstances indicating that the documents are used for illicit activities. As such, knowledge is not presumed and hence, there is an implicit necessity of notifying the intermediary of the existence of such illicit content. Once such notice is given, the intermediary, as defined in section 22, must act promptly to take down the content or limit access to it. Federal legislation The Competition Act5 (“CA”) regulates most business conduct in Canada, its main purpose being to prevent anti-competitive practices in the marketplace. The CA prohibits false or misleading representation and deceptive marketing practices in promoting the supply of a product or any business interest. Moreover, persons who “caused the representation to be made” are held liable for false or misleading representations or deceptive practices. This implies that not only is liability imposed on the person who crafts misleading or false advertisement, but also on the person who permits a representation to be made or sent. The “Enforcement Guidelines – Application of the Competition Act to Representations on the Internet” mention that, in the online environment, the Competition Bureau will be called upon to consider the respective roles of the different intermediaries involved in advertising on the Internet. It is further explained that: [i]n its enforcement efforts, the Bureau focuses on the party who “causes” the representation to be made. Determining causation requires an analysis of the facts to ascertain which player possesses decision-making authority or control over content and to assess the nature and degree of their authority and control.6 [our emphasis]   Thus, the level of liability attributed to a given party will largely depend on the level of control they have over the content and whether they played a part in deciding whether the ad ran or not. Under the CA, there are two adjudicative regimes which sanction false or misleading representations: a civil track or the criminal track. The civil regime applies to most instances of misleading representations and deceptive marketing practices since the burden of proof is lighter. The general criminal process, however, covers “the most egregious matters” and requires that a component of criminal intent be demonstrated.7 Potential liability for advertising generators Merchant The merchant is the party that has the authority to decide whether an ad is run or not. As such, it is usually easiest to attribute liability to the merchant, who is the party most often held liable for deceptive marketing practices, be it with respect to the CPA or the CA. Media planning agency The media planning agency can have a dual role. That is, it may act as a creative agency that creates the advertisement (liable under the CA) and/or may assist an advertiser in determining which media to use, be it television programs, newspapers, bus-stop posters, in-store displays, banner ads on the web, or a flyer on Facebook. The liability of an Internet media planning agency will naturally depend on the exact role it plays in the advertisement. In terms of the criterion of authority and control, if the agency acts as “the creative” and is responsible for the ad content, then it is likely to be held liable for false or misleading representation. If, on the contrary, the media planning agency is solely responsible for speculating on the viewer demographics and accordingly elaborating strategies as to which media would be the most effective to run ads in, then it is not likely to be held liable for deceptive marketing practices. As the agency’s participation increases so does its duty of care.8 Participation, in the eyes of the Federal Trade Commission and the courts is taken to mean when the agency carries out the will of the advertiser.9 Ultimately, whether an agency’s participation is “active” depends on a case-bycase analysis.10 There could also be instances where the agency would be responsible towards the merchant. Potential liability for advertising disseminators Media placement agency The media placement agency, also known as media buyer, is responsible for the negotiation and placement of the media campaign. Its role includes optimizing and evaluating the ad’s effectiveness both during and after the advertising campaign’s completion. Additionally, the media placement agency generates added value by either negotiating lower rates with the host or adding layers of behavioural or location based targeting through ad-platforms (typically not liable). Website or web page host The host, also known as the publisher, is an entity that owns a web page or a website and that, in exchange for some economic compensation, is willing to publish ads of other parties in some spaces of its page or site. LCCJTI establishes that a non-search engine host will be exempt from liability unless it has knowledge that the information it stores is being used for illegal activity or if it does not promptly act to impede access to such illegal documentation. Similarly, a search engine will be liable if it has knowledge that the service it provides enables illegal activity and if it does not promptly cease to provide such a service to the people it knows are engaged in that activity. Either way, the determining factor is knowledge. With respect to the CA, a host may benefit from the publisher’s defense and not be held liable in a civil suit provided it does not knowingly or recklessly partake in or allow false or misleading advertising. The take-away In navigating new online marketing strategies, one should bear in mind that as efficient as online advertising can be, it has also significantly contributed to a rise in the potential for false or misleading representations. The threshold in assessing false or misleading representations is particularly low, as it is evaluated from the average consumer’s perspective, i.e. a “credulous and inexperienced” consumer.11 Although the various players in the marketing world are no strangers to the concept of false or misleading advertising, they should be cautious in using new forms of marketing so as not to go beyond this low threshold. Indeed, there are certain considerations that are specific to the Internet medium, which involve among other things, the speed and efficiency with which consumers can perceive ads. One should also be wary of legislative changes regarding consumer protection and competition law. For instance, Bill 13412 has recently set out to amend the CPA so as to prohibit merchants from “falsely or misleadingly representing to consumers that credit may improve their financial situation or that credit reports prepared about them will be improved.”13 There is a considerable volume of credit offering advertising that circulates via SEM and SMM. Advertisers should be cautious and make sure they respect these measures once they are enacted as well as the other legislative tools mentioned in this publication. R.S.Q., c. P-40.1. Ibid., s. 219. R.S.Q., c. C-1.1. 2010 QCCA 584, para 75 [Unofficial English translation]. R.S.C. 1985, c. C-34. Innovation Government of Canada, “Application of the Competition Act to Representations on the Internet”, (October 16, 2009). Innovation Government of Canada, “Misleading Representations and Deceptive Marketing Practices: Choice of Criminal or Civil Track under the Competition Act”, (September 22, 1999). Kelley Drye & Collier Shannon, “Ad Agency Liability” (2005) Ad Law Advisory. Ibid. Ibid. Richard v. Time Inc., 2012 SCC 8, [2012] 1 SCR 265, para 78. An Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs, Bill 134 (Introduction – May 2, 2017), 1st Sess., 41st Legis (QC). Ibid., Explanatory Notes.

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