Canada’s New Greenwashing Regulations: What You Need to Know
On June 20, 2024, Bill C-59 received Royal Assent and officially became law, implementing its provisions into Canadian legislation. The Bill, along with Bill C-69, which was passed on the same day, introduced new subsidies to encourage investment in clean energy in Canada. Bill C-59 established the Clean Technology Investment Tax Credit and Carbon Capture, Utilization, and Storage Tax Credit. Bill C-69 created the Federal Indigenous Loan Guarantee, the Clean Technology Manufacturing Investment Tax Credit, and the Clean Hydrogen Investment Tax Credit.
However, the positive impact of these new subsidies was overshadowed by the greenwashing regulations added late in the process for Bill C-59. The new greenwashing rules amend the Competition Act to require that claims made by companies about environmental, ecological, or climate change benefits can be verified. Because of the ambiguity of what is needed to comply with the rules, many energy companies have deleted all GHG emissions and other sustainability content from their websites, including annual sustainability reports and commitments to improve environmental performance in the future.
This week on the podcast, our guest, Kaeleigh Kuzma, a Partner at Osler in the Competition, Trade, and Foreign Investment Group, explained the new greenwashing rules.
Here are some of the questions Peter and Jackie asked Kaeleigh: Why is greenwashing included in the Competition Act? Can you explain the provisions? What does “proper substantiation in accordance with internationally recognized methodology” mean? Why are the rules so vague, and what is the process for clarity? Do these rules only affect oil and gas and other heavy-emitting companies, or do they also apply to clean energy companies? What is the process for filing a complaint against a company to the Competition Bureau? What are the methods of enforcement?
Other content referenced in this podcast:
- Osler’s detailed multi-part guide on the Competition Act amendments, with a specific section on deceptive marketing practices and greenwashing, here.
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Episode 247 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back. Jackie, I grew up in an age where there was an old adage that said, “When you have people over, never talk about politics, sex, or religion,” and well, we have people over now, our audience who’s listening in, energy, sex, and religion, well, I don’t know. It doesn’t really go together, but energy and politics, energy and policy certainly go together, and I think we’ll break that rule, even though we have talked certainly about a lot of policy in the past. But I think we have to talk about policy and politics today as we think about all the bills that have passed in the last week, several elements of which are quite contentious, but I think we have to tackle them head on.
Jackie Forrest:
Yeah, for sure. So, this greenwashing bill as it’s being called, but actually it was much more than that. I do want to talk about that.
Peter Tertzakian:
Yeah. Well, maybe we should issue actually a warning here that this podcast has not been verified by any international body or standard.
Jackie Forrest:
Nor we can substantiate any of the claims that we’re making because nowadays with this new passing of Bill C-59, everyone’s a bit worried about what they’re saying.
Peter Tertzakian:
What they actually say. I mean, there was many bills, right? There was not just C-59. There was two, 59, 69.
Jackie Forrest:
Yeah, a lot of legislation got kind of slammed through here on June 20th. A lot of changes, and I’ll just talk quickly about some of them in a minute. And there was some good news stories, by the way, for energy, and I don’t want that to be lost in this, but that has all been overshadowed by this greenwashing.
Peter Tertzakian:
Well, let’s go for the good news first.
Jackie Forrest:
Okay. Well, some of the changes are that in the C-59, they put through some of the investment tax credits. So, this clean technology investment tax credit, which will provide something like 30% of the initial cost of your clean energy, any kind of clean energy generation project, and a 10% adder. We also had the long-awaited carbon capture utilization and storage tax credit that got announced, which is 50% for capturing from smokestacks and then some additional adders for labour as well. And then the C-69, which actually didn’t make any news at all. If you’re not a policy wonk like me, you might’ve even missed. It passed. It had a whole bunch of things, broad omnibus bill as well.
Peter Tertzakian:
It’s not the old C-69 from a few years. This is a new C-69.
Jackie Forrest:
Yeah, I guess they can use the same numbers. Yeah, it’s called C-69. It actually, interestingly enough, did have amendments to the Impact Assessment Act to ensure its constitutionally sound. Remember that?
Peter Tertzakian:
Well, maybe that’s why it’s called C-69 because that was-
Jackie Forrest:
Yeah. But it had other stuff too, though. It had stuff for rental and broad social issues, but it also had the federal Indigenous Loan Guarantee Program, $5 billion program, Clean Technology Manufacturing Investment Tax Credit, Clean Hydrogen Investment Tax Credit. Those are the energy related ones. So, lots of good news. I think these investment tax credits, I think are going to help accelerate some of the investment in clean energy. Now, when it comes to the power one, that’s probably the big one. Crown Corp sort of set the pace of in most parts of this country, in terms of how much investment there is in clean energy, such as wind farms or solar farms or battery projects. So, I’m not sure that it accelerates that much, but I think it does reduce the cost and therefore lower power prices. But I do think it’s really going to increase spending on smaller, behind the meter, non-regulated investments. So anyway, I think it’s really good news for clean energy that these are in law.
Peter Tertzakian:
Mm-hmm. Okay, so C-59 greenwashing. Again, neither you nor I are legal experts on this matter, nor parliamentary experts. So, we always phone a friend, and we are delighted to have a friend with us, Kaeleigh Kuzma, who’s a partner at Osler, the legal firm here in Calgary. Welcome Kaeleigh.
Kaeleigh Kuzma:
Thank you for having me today. So, a little bit about myself and Osler, as Peter said, I’m a Partner in Osler’s Competition Trade and Foreign Investment Group. Our competition expertise spans mergers, competitor collaborations, abuse of dominance, criminal competition matters, marketing and advertising, pricing and distribution. We provide advice on Canada’s foreign investment laws, including the National Security Review Regime. And lastly, we’re fortunate to have lawyers with expertise in international trade, including trade remedies and disputes, free trade, customs, sanctions, exports. So, I personally have been advising clients on competition and foreign investment matters for over 15 years. And I work with businesses in a broad range of industries, including energy. I started my practice at Osler in Toronto right out of law school, and I moved to Osler’s Calgary office about three years ago. I was born and raised in Saskatoon, so this is kind of a return to my-
Peter Tertzakian:
Kindred spirit.
Kaeleigh Kuzma:
Yeah.
Peter Tertzakian:
Kindred spirit. So was I.
Kaeleigh Kuzma:
Really? Wow. So yeah, so this has been a return to Western Canada, and I’m really happy to be here. And it’s also a really, really exciting time to be practicing law in this space. There have been recent legislative changes, both from a foreign investment and a competition law perspective, and the framework governing competition law and the conduct of business in Canada has changed dramatically. At Osler, we’ve prepared a detailed commentary on the Competition Act amendments, including these greenwashing provisions that we’re going to be chatting about today. And so, you can go look for that on our website.
Jackie Forrest:
And we will put a link to that in the show notes when it’s available.
Peter Tertzakian:
So, I’m just going to start out by asking why greenwashing, which I sort of think is false advertising I guess really. Why is greenwashing in the competition law area?
Kaeleigh Kuzma:
Well, so the Competition Act has had provisions addressing misleading representation, misleading advertising for many years. And these provisions actually, they do capture greenwashing prior to these amendments. But to provide a bit of overall context for these amendments, which are specific to greenwashing, we’re not really a first mover in Canada in terms of taking action and taking increased focus on greenwashing. There’s been a spotlight, as I’m sure you’re well aware on greenwashing claims, environmental claims internationally.
Peter Tertzakian:
So, what you’re saying is that while we are up in arms about this thing that was quickly stapled to a much bigger omnibus bill called C-59, which was really the budget in many ways, but that there’s precedent for this sort of thing in other western democratic countries. Is that what you’re saying?
Kaeleigh Kuzma:
Well, first of all, there’s definite precedent for Competition Act amendments being stapled to a budget bill, that happens quite regularly. But just generally, I think the approach to greenwashing provisions or environmental claims, there has been increased enforcement and increased focus on this in other jurisdictions. The Competition Bureau in Canada consistent with competitions, securities and other enforcers and regulators around the world like in the United States, has taken action against greenwashing in the past. And so, I think the inclusion of these provisions specific to greenwashing in the Competition Act really highlight that it’s becoming more of an enforcement priority in Canada like it is in other places.
Jackie Forrest:
People may not be aware, I wasn’t aware that over the past several years, some Canadian environmental groups have lodged complaints with the Competition Bureau alleging these false environmental claims for in a variety of sectors, including energy banking. So, the Competition Bureau has already been used. This is just kind of creating maybe more ability for it to be used in the future and these changes, I think one other thing that was controversial about them, and you already mentioned it, Peter, is that they were introduced late in the process and there’s a feeling that they didn’t get the proper debate. And also, there isn’t a lot of clarity. They’re very generic in terms of people’s interpretation of them, and I just want to go over what the legislation says. We can put a link to the bill and the language, which is in clause 74.01 for those that we’re not going to read at all that want to really get into this.
But there’s basically some specific words here around that people can’t promote their business interest without having an adequate, proper test and proof that what they’re saying is actually what is real. And specifically, it says when it comes to environmental benefits such as effects on climate change, if they’re not based on adequate and proper substantiation in accordance with the internationally recognized methodology, then you’re going to be in trouble.
And you need to yourself, if you put out you as a company or you as an individual put out some sort of claim, the burden is on you to prove that what you are saying is correct. Now, there’s other amendments to you that talk about how they’re going to enforce this. The enforcement is if someone decides that you have made a claim that isn’t verifiable by an internationally recognized methodology and substantiated, then they can take a complaint to this Competition Tribunal who will evaluate the claim and could give a fine not exceeding $10 million or 3% of your annual worldwide gross revenue.
So, it could be quite expensive if you’re found to not be in this. And I think it’s not just the money too. I think having a company that comes out of a process like this that says that they were greenwashing is not something that any company would really want to have in the public press as well. So maybe we’ll take a break there, Kaeleigh. Just give us some high-level comments. Did we get it right and did we have the right context there in terms of the provisions that are important?
Kaeleigh Kuzma:
Yeah, I think so. I thought I could maybe provide a few observations about the provisions. I don’t think we want to read through them, but as you noted, Jackie, first, they reverse the onus. So, where a claim relates to the environment, the business must be able to prove on a balance of probabilities, which means that they need to show it is more likely than not that the claim is substantiated.
Second, and this is a distinction from the other general misleading representation provision of the act. There’s no additional requirement for the commissioner or a private party to establish that the representation is false or misleading in any way. So, if the claim cannot be substantiated, it is effectively deemed to be misleading in a material respect. And third, this goes, I think, to your latter point about enforcement. And this is a case with nearly all of the civil provisions of the Competition Act now, there will soon be another avenue of enforcement through private parties, which will be available in June 2025. The party must be granted leave by the tribunal and leave, which essentially means that the tribunal provides permission to bring the case will only be granted if the tribunal determines that the case is in the public interest. And so that applies to private enforcement by individuals. They’re still the commissioner as an enforcer.
Peter Tertzakian:
There’s a whole bunch of things here, tribunal, who is on this tribunal?
Kaeleigh Kuzma:
The Competition Tribunal is an administrative tribunal body. It’s made up of federal court judges, economists, businesspeople, but that’s its composition. And they are tasked with reviewing, deciding cases that are brought to the Competition Tribunal with respect to all civil provisions of the Competition Act.
Peter Tertzakian:
It strikes me that it’s the lack of clarity that’s the issue here because there’s so many gray zones. If I think about false advertising, okay, let’s think about other types of processes, products. Let’s go to cures for baldness as an example, right? We’ll call that hair washing. So-
Kaeleigh Kuzma:
Which we’re not allowed to do these days.
Peter Tertzakian:
Which we’re not allowed to do. Yeah, you’re not allowed to do that these days.
Kaeleigh Kuzma:
That’s been banned in Calgary.
Peter Tertzakian:
That’s been banned. So, you make a claim about curing baldness. It’s pretty clear if your hair doesn’t grow, that’s false advertising. Okay. Now in this instance, it’s largely targeted towards climate mitigation claims, emission reduction claims, which are vague even in this country, let alone by some international standard, which is poorly defined. How is this tribunal going to assess potentially hundreds of claims of, “Hey, this website is wrong, take it down”, or worse levy a fine on the people who put the website up and all this. Can you talk about the process, the tests that you talked about? You talked about a test test to be done. How is this going to work?
Kaeleigh Kuzma:
You mean the test for leave?
Peter Tertzakian:
Yeah.
Kaeleigh Kuzma:
So, I mean, that’s something that will need to be developed by the tribunal. I mean, there’s all sorts of matters at the Competition Tribunal at courts where leave has to be granted to a party before they can bring a case and there’s different standards. This is a public interest leave. But what public interest means in this context will need to be developed by the Competition Tribunal when the first one or two or three cases are brought. And I do think everybody’s going to be watching with real interest to see what public interest means in this context of environmental claims.
Jackie Forrest:
Well, and they’ve already started a process to get some feedback. We can put a link to this for those that want to participate, but there’s no deadline. It’s a simple form. But the Competition Bureau has put out a notice that if you want to give feedback to these changes, not just specific to greenwashing, but just every change that was made in the bill, you can do that. So, I guess a process to provide clarity is expected. What does that look like?
Kaeleigh Kuzma:
So, the Competition Bureau, when new legislation is passed or there’s amendments to existing legislation and it requires some guidance from the enforcement agency, they will usually have a consultation period taking views from stakeholders. So, lawyers like us, economists, businesspeople, other experts or individuals, organizations who have an interest, maybe enforcement agencies and other jurisdictions, and have a consultation on what the guidelines should look like, what should be included in them. They typically issue a draft guidelines that are open for a consultation period after which the guidelines would be finalized. It takes some time. It takes a few months. Yeah.
Jackie Forrest:
A few months. Sounds like a longer than a few months. I want to get into the reaction because first of all, I’m sure all of our listeners are aware, unless you’ve been under a rock for the last two weeks, that many energy companies, oil and gas companies specifically, have removed all sorts of information from their public websites.
Peter Tertzakian:
And utilities as well.
Jackie Forrest:
Yeah, utilities too. And some of them have put messages like we’re still committed to our environmental performance, but we’ve removed this information due to considerable uncertainty related to this new bill, C59. And it also talk about, until the Competition Bureau provides clarity and specific guidance on what is required to comply with these laws, we don’t think we can put our information up. So, they’re basically saying, we need this whole process to run before we can start putting… they’ve taken off their annual sustainability reports. There’s no information at all. Now, to me, it’s terrible because now investors, people that are looking at these companies, they can’t get access to this information, which is important to understand the risks you might have as an investor in the company, or if you’re a local stakeholder, the risks that you might have by having that company working in your backyard.
Kaeleigh Kuzma:
Yeah, I mean, we can talk about the term internationally recognized methodology and what does that mean? And it is undefined in the act, and I appreciate that causes some discomfort, some angst in the business community. On the other hand, the Competition Act is broad principle-based legislation. And it’s not uncommon for competition legislation in Canada and elsewhere to be drafted in a flexible manner, which is then clarified and developed by guidelines, by the enforcement agencies, and then by court decisions. So, during the Senate debates, just before this bill was passed, it was commented that while the term may appear vague, the words should be interpreted in accordance with their ordinary meaning.
And they also said that an analysis of a representation should consider federal and other Canadian best practices, such as those set out by Environment and Climate Change Canada. And as you’ve noted, the bureau was committed to consulting with stakeholders and releasing guidelines that will provide a predictable framework for purposes of assessing the substantiation of enforcement claims. But in the interim, businesses are going to have to deal with some uncertainty.
Peter Tertzakian:
And it’s not just oil and gas companies and utilities, any company that is associated with environment and dominantly emissions. So large industrials. But I would also argue clean energy companies, renewable utilities, others that are making claims about their emissions mitigation, their net-zero aspirations and where they’re at with that are potentially vulnerable to challenge.
Kaeleigh Kuzma:
Well, absolutely. These provisions apply to all organizations, all companies who make performance claims about environmental benefits or aspects of their products. So, while these provisions are new, and Jackie mentioned this a bit in her introduction, the bureau has previously investigated environmental claims in a number of industries other than oil and gas, like forestry, automotive, banking, and various consumer products.
Peter Tertzakian:
Well, I actually looked online and did some searches to see if I could find renewable energy companies, clean tech companies that are making claims. For example, we are taking the equivalent of 230,000 vehicles off the road. And there are several, I’m not going to name them, but they’re out there that we are taking so many hundred thousand vehicles off the road with our technology. Well, that’s a claim that to me, prove it to me. What kind of vehicles are we talking about? SUVs, compact cars, we know, is it the average size of vehicle emissions that we’re talking about? Well, that varies from region to region. What’s the international standard? And so are companies that are making such claims that are vague. And I know that these claims are being made to give some sense of scale, and it’s not malicious. But according to the letter of this, what I read here in this bill, I mean, I would be inclined to take my website down because all it takes is six people to challenge me.
Kaeleigh Kuzma:
Well, so we can talk a little bit about that six…
Peter Tertzakian:
Yeah, let’s put that aside for minute.
Kaeleigh Kuzma:
The six complainants later. But I mean, right now, I think in the interim, until we have this guidance from the bureau, businesses making claims or representations relating to environmental concepts should be doing so in a way that’s consistent with the most recent evidence of methodologies of third-party organizations with expertise in the field.
Jackie Forrest:
You mean you have a consulting company come in and audit your numbers and put a stamp of approval?
Kaeleigh Kuzma:
That’s one example, right. If you’re making environmental representations, businesses should disclose the sources that substantiate the claim if they can. That would help. And for firms that are designing and creating new technologies to assist in environmental efforts, their disclosure should be about what they’re doing, the purpose of their efforts. And they need to be mindful of any guarantees regarding outcomes or the performance results of those efforts. Because this is akin to performance claims, which as you mentioned, Peter, that performance claims can be challenged by under the Competition Act, general provisions. They don’t have to be related to greenwashing if they are not supported by adequate and proper testing.
Jackie Forrest:
Okay. Well, there’s been other reaction to this. The environmental community has also reacted in a different way, but with some saying that the fact companies are removing information is telling, basically implying that they don’t think that their information is credible because why would they take it down if they can’t defend it? And there’s been a lot of op-eds, there’s been a series of op-eds, and I wanted to talk about Kevin Krausert’s from Avatar Innovations. I think we mentioned him recently on the podcast when David came on.
But he talked about his view is this is going to cripple investment in clean tech because a lot of reason that companies invest in new technologies is actually voluntary today. And it’s because they put out these historical greenhouse gas emissions and make goals about improving them, and that motivates them to go out and buy technologies that improve them. If they can’t go out and advertise how they’re reducing their emissions, there’s not much motivation to put money to work because there’s no benefit if you can’t put that information out there. So, I think he has his op-ed, which we will put a link to, had some good arguments in how this is really going to hurt investment until we get this solved.
Peter Tertzakian:
I don’t honestly understand how anyone can think that this is positive. We are trying to create and foster an environment to encourage the investment of capital into decarbonization at large, clean technology, oil and gas, CCS, big emitter industrials, steel fertilizer, whatever. And to create this level of uncertainty drives investors away. There is no incentive speaking as a financial professional to invest in anything that has this level of vagary.
And so, I don’t understand how environmental groups can think this is positive because then we’re going to come to it, Kaeleigh, all it takes is six people to challenge somebody’s claims, green company, emitter company, or otherwise. And so, creating such vagary basically says, “I’m taking my ball and my bat and I’m going to go play elsewhere.”
Jackie Forrest:
Think about the investment community has been pushing for years to get companies to report more on these things as a way to understand the risk that they have associated with climate change and coming policy. And now all this information’s been taken away. So actually, I totally agree. If the goal is to get more money moving into this sector faster, not having any information out there, and I know this might be temporary, it may be in a year or something, you get that information, but I think it’s creating a pause on investment, and that’s counter to the goal.
Peter Tertzakian:
Well, it pulls on investment in all energy, on all industry that has to make claims clean, green, or otherwise. And so, let’s talk about the other part of this, which is what does it take to bring action forth to the Competition Bureau?
Kaeleigh Kuzma:
Sure. So, the Competition Bureau, they receive thousands of complaints about all sorts of conduct that could possibly fall within the parameters of the Competition Act every year. So just to give you a data point, for their fiscal year ended March 2023, they received nearly 6,000 complaints relating to deceptive marketing, and that accounted for more than 90% of all complaints they received.
So, the bureau is busy, they receive a lot of complaints, and making an informal complaint is pretty darn easy. It’s as simple as completing the bureau’s online complaint form or picking up the phone. And the bureau investigates, at least in some preliminary fashion, all complaints they receive. Following an investigation, if the commissioner has reason to believe that grounds exist for a tribunal order, then the commissioner can open an inquiry. And where an inquiry is open, the commissioner can use certain information gathering powers. And so that’s kind of the informal way of complaining.
Then you speak about this six-person complaint process. So, in contrast to this informal complaint route, there is a more formal means of complaint, which is called the Section 9 complaint. And where a Section 9 complaint is made, it compels the Bureau to commence an inquiry. And a Section 9 complaint is also pretty straightforward. Six Canadian residents provide affidavits stating that in their view, grounds exist for an order, and they explain the facts supporting their view.
And the Section 9 complaint route has been used by environmental groups to compel the commissioner to investigate environmental claims. And we know this because the groups usually publicize them, publicize their complaints, and so it does get picked up in the press. But I mean, it’s important I think to keep in mind that there’s no guarantee that a Section 9 complaint will result in the Bureau taking enforcement action. The bureau can and does close inquiries without taking any action, whether they’re inquiries that are commenced by the commissioner or inquiries that are compelled by this six Section 9 complaint route.
Peter Tertzakian:
So, help us visualize the process a bit more in detail. An envelope or PDF. Okay, I’m old school, an envelope. Let’s say a PDF arrives with a complaint from six people with an affidavit. Is there someone who’s arbiting this, like that’s the first cut.
Kaeleigh Kuzma:
So, it would go to… the Competition Bureau has various directorates depending on the-
Peter Tertzakian:
Sort of gatekeepers.
Kaeleigh Kuzma:
Yeah, gatekeepers, and various directorates depending on what the conduct relates to, right? So there’s mergers, unilateral conduct, there’s deceptive marketing practices, and so it would go to the particular branch who would take it in, review it, consider it, and then proceed to do an investigation.
Peter Tertzakian:
So do you have any stats on what percentage of all the claims that are coming in the door of the Competition Bureau actually make it through all these gates to something serious?
Kaeleigh Kuzma:
I don’t have those stats on me, unfortunately, but I mean, given the number of complaints that the bureau receives in a year, over 6,000, it’s a small slice of those.
Peter Tertzakian:
I mean, is it fair to say that something like this is because it’s contentious and is likely to draw out a lot of activists that there’s going to be overwhelmed with submissions?
Kaeleigh Kuzma:
There may be some activity in these first early days of the greenwashing provisions being enforced, but this was already happening with environmental groups, with using just the general deceptive marketing provisions of the act. So I think it’s reasonable to think that there may be some increased activity. I think that’s part of what these amendments are intended to do. They’re intended to increase enforcement activity in this space.
What is considered to be misleading under the Competition Act has not fundamentally changed as a result of these provisions. I think what they are doing is they are highlighting environmental claims specifically and saying this is an area of increased scrutiny under the Competition Act, and you should expect that your claims will be subject to increased scrutiny.
Jackie Forrest:
All right. Well, let’s talk about… I know we don’t know exactly what it is, and this is why these companies have taken the information off the website. But here’s some examples that we could run by. Let’s say a company issues greenhouse gas emissions data showing their carbon intensity over the past five years showing that they have reduced the intensity by 30%. That’s pretty standard stuff. A lot of companies have that kind of information on their website these days, especially in the oil and gas industry.
Now, the data may not be third party verified, it may be internally calculated, it may use a methodology that is or is not an international standard. For example, a lot of people are using a GHG Protocol these days. That standard, I would say, I guess you could say it’s international, but there’s a lot of grayness to it. I kind of equate it to the early days of GAAP financial reporting where it’s just so broad that people can interpret it a lot of different ways, and how they interpret it will result in quite different results. Is this something that companies could be worried about because it’s not verified, because they’re not sure if the GHG Protocol and how they interpret it is an international standard that they have a claim at the Competition Bureau?
Kaeleigh Kuzma:
So, I think at this point, businesses should be prioritizing their compliance efforts as they consider new representations and take proactive measures to address potential risks with existing representations and claims, and adjustments may be required. So for example, if a company has issued GHG emissions data showing carbon intensity measures, and they show that they’ve reduced their emissions, but the data hasn’t been third party verified, but it’s internally calculated and they have documented assumptions and that transparent method, in that sort of example, the company should disclose the technology, they should disclose that there’s testing, and they should disclose the methodology and the fact that it has not been substantiated by an independent third party, that should also be disclosed, and they can reassess their claims when this bureau guidance comes out.
One thing we haven’t spoken of, and I think it’s really important to keep in mind, is the act before these amendments and now currently continues to include an explicit due diligence defense for representations. And this means that where it’s demonstrated that a company took all reasonable steps to avoid the misrepresentation, the remedies available against them are more limited.
Jackie Forrest:
Okay. So, if you’re very transparent, that helps you out a lot.
Peter Tertzakian:
So, Kaeleigh, assuming that this goes through the stage gates, fairly serious case of greenwashing in the eyes of the tribunal, then what are the penalties?
Kaeleigh Kuzma:
So, the Administrative Monetary Penalty, which is a payment to the government, so it is not damages or monetary relief to a private party who brings a claim, that is not new, and it’s existed for years. In 2022, the maximum penalty available was increased from 10 million to the greater of 10 million or three times the value of the benefit derived from the conduct, or if that can’t be calculated, 3% of annual worldwide gross revenues. And where the Bureau takes enforcement action, AMPs, which is what we call them, they do regularly form part of the remedy. The bureau’s website contains a listing of all misrepresentation matters where an AMP was imposed and the value of the AMP, so for example, the most recent AMP was just earlier this month in June. It was 3.3 million and it was part of a settlement with SiriusXM Canada to address bureau concerns with certain of their advertising practices.
And when the commissioner decides to pursue enforcement action at the tribunal or private parties now starting in June 2025 seek enforcement action, they’re granted leave, and the tribunal is considering whether or not to impose an AMP because they found conduct that violates the provisions, there are some parameters set in the competition act. So first of all, the purpose of an AMP is to promote compliance with the law, and it is not to punish. And second of all, there are certain factors that are to be considered when determining the quantum of an AMP, so for example, the frequency and the duration of the conduct. And there’s other remedies available that don’t relate to financial-
Peter Tertzakian:
So what you’re saying that instead of a fine, the action undertaken by the Competition Bureau may be like, okay, time to take that website down.
Kaeleigh Kuzma:
Exactly. So, the other alternative remedies are a prohibition order, so don’t make that claim or similar claims, and requiring corrective notices. And as I mentioned, not all bureau investigations result in enforcement action, and from a private action perspective, once that’s available in June 2029, remember that they have to obtain leave. But from a private action perspective, once that avenue is available in June 2025, remember that a private party must obtain leave and it will be granted on a public interest basis only. So, the tribunal will act as a gatekeeper.
Peter Tertzakian:
So, for our audience that’s not legally versed, what do you mean by take leave?
Kaeleigh Kuzma:
Take leave, that is when essentially what happens is that you apply to bring a case at the Competition Tribunal and the tribunal has to give you permission to bring the case. That’s what leave refers to.
Peter Tertzakian:
Okay.
Kaeleigh Kuzma:
And so they will only give you permission if it is in the public interest to do so.
Jackie Forrest:
So that’s that first gatekeeper that you must get through.
Kaeleigh Kuzma:
Yes.
Jackie Forrest:
Okay. So we talked about the fact that they’re going to provide more clarity. What do you expect that that would look like in the end? And we talked about several months, if there’s any timeframe you could estimate.
Kaeleigh Kuzma:
So, I think the bureau is certainly aware, the government’s aware of reactions and activities in response to this new legislation, and so I do expect that they would welcome participation from organizations who have concerns regarding the terms used and their scope. And those with concerns or questions should really, I would encourage them to get a seat at the table and help shape the guidelines. Participate in the consultation, provide examples of where you see the legislation potentially resulting in unintended consequences or creating significant risk of frivolous litigation. It’s really important that your voice is heard, and you become part of shaping the law.
Peter Tertzakian:
So that’s great and I think it’s positive that they’re seeking consultation and so on, but why would they not do that before they pass the bill, rather than create all this ruckus anxiety and uncertainty by passing the bill and saying, “Okay, now let’s clarify?”
Kaeleigh Kuzma:
Yeah. Well, I think that goes back to my earlier comment, is that competition law is very much a broad principle based legislation, and so it is not prescriptive legislation. It does not provide you a list of very defined yes/no rules for conduct. It is principle based and it is developed by guidelines and by courts, and that’s how the Competition Act regime works in Canada and many other places.
Jackie Forrest:
Yeah, I guess I can understand that to some extent. If I look at the US, the Inflation Reduction Act, they came out with the legislation, and two years later, each of these, the Treasury Department is coming out with specifics of how you can qualify for these. So I guess that’s kind of a similar example, where the details come out through the agencies that have to implement the legislation.
Kaeleigh Kuzma:
Exactly.
Peter Tertzakian:
Yeah, I’ll accept those answers only in part because I feel like if we are going to pursue this aggressive decarbonization agenda, we don’t have the luxury of time to bumble around with these kind of vagaries and uncertainties that actually, potentially in the long term maybe okay, this legislation, but in the near term just creates so much consternation, and frankly, outright antagonism that is completely unproductive.
Jackie Forrest:
Yeah, I agree. And by the way, Peter, I was thinking last night, I went to the government website and I was looking at their 20, 30, 40 to 45% goal, emissions reduction goal. There’s no real credible plan that I could see about how they’re going to substantiate how they’re going to get there, and what about net zero 2050?
Peter Tertzakian:
Or the target-
Jackie Forrest:
I don’t think our government has any goal substantiating that, or data using an international standard. So, I think maybe-
Peter Tertzakian:
Or what about the 2030 target? So that’s only five years away.
Jackie Forrest:
Yeah, well, there’s no… 40 to 45% reduction? They may have some sort of model or profile that shows it going down linearly, but we know that there’s no actual ability to do that. We certainly haven’t been able to do that in the last several years, so maybe we need to get six people to put a complaint in here about the government’s advertising.
Peter Tertzakian:
If they’re advertising, or my question was is the National Inventory Report of Emissions data held to an international standard of verification?
Jackie Forrest:
Yeah, good question, because a lot of people are using that data and-
Peter Tertzakian:
And in fact, a lot of the utilities, oil and gas companies are using that data and they’ve pulled it down historically, because it’s not really clear whether that data is up to the standard. And again, another point of vagary that just-
Jackie Forrest:
It’s not constructive.
Peter Tertzakian:
It’s just completely unconstructive. So what are you saying? You’re going to get six people to challenge the veracity of the National Inventory Report and call it greenwashing?
Jackie Forrest:
Yeah, we’ll add the net zero 2050 and for sure the 2030 one, because I have a hard time understanding how we’re going to achieve that one.
Peter Tertzakian:
Yeah, I think that it’s very difficult to call that anything other than hugely aspirational, and in the worst case, misrepresentation, and shall I say, greenwashing.
Jackie Forrest:
All right. Well, with that, we really appreciate Kaeleigh because we actually don’t know what we’re talking about. You covered on the podcast and-
Peter Tertzakian:
Thank you for… Yes. So, Kaeleigh Kuzma from Osler, thank you so much for joining us.
Kaeleigh Kuzma:
Thank you for having me. That was really fun.
Jackie Forrest:
And thank you to our listeners. If you enjoyed this podcast, please rate us on an app that you listen to and tell someone else about us.
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