Alberta Enterprise Group (AEG) and the Independent Contractors and Businesses Association (ICBA) are challenging recent anti-greenwashing amendments to the Competition Act (Act) as contrary to freedom of expression under section 2(b) of the Canadian Charter of Rights and Freedoms (Charter).

Prior to the 2024 amendments to the Act, the Competition Bureau (Bureau) had been investigating alleged false or misleading environmental claims, commonly referred to as “greenwashing.” Historically, the Bureau relied on the Act‘s general prohibition against false or misleading claims to address such issues. Such investigations include organizations such as Lululemon, Royal Bank of Canada, Shell Canada, Canadian Gas Association, Canadian Forestry Initiative, Pathways Alliance, and Enbridge Gas. 

Bill C-59, which included the June 2024 amendments to the Act, introduced more targeted anti-greenwashing provisions, equipping the Bureau with enhanced enforcement tools and granting private parties a statutory right of action to pursue greenwashing claims.

Only months after these new rules came into force, AEG and ICBA brought a constitutional challenge to the Alberta courts, questioning their legitimacy under the Charter.

This blog examines the legal context, compares relevant case law, and considers the likelihood of success the legal challenge poses in like of past case law.

The amendments being contested

Bill C-59 amended the Act to include two new provisions under section 74.01(1):

• 74.01(1)(b.1) applies to the representations made to the public about a “product’s benefits for protecting or restoring the environment or mitigating the environmental, social and ecological causes or effects of climate change that is not based on an adequate and proper test”.
• 74.01(1)(b.2) applies to the representations made to the public concerning 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 that is not based on adequate and proper substantiation in accordance with internationally recognized methodology”.

Both provisions apply “reverse onus” requirements on the persons making the representation, should the Bureau challenge the environmental claim. In such instances, the defendant would need to show that the environmental representation made about a product is based on “adequate and proper” testing and that the representation made about a business or its activity is properly substantiated per  “internationally recognized” methodologies.

Additionally, the Bill-C59 amendments extend private party challenges under section 103.1 of the Act to include deceptive marketing practices under section 74.01. Private parties, who wish to commence a challenge under section 74.01, can seek leave to the Competition Tribunal (Tribunal) if they can demonstrate that it is in the public interest to do so. This is likely to expand participation by public interest litigants, especially non-governmental organizations (NGOs) seeking to hold large emitters who may engage in greenwashing practices accountable.

The constitutional challenge: freedom of expression or free rein to mislead?

On 4 December 2024, AEG and ICBA launched a constitutional challenge against the Canadian Federal Government in the Court of King’s Bench of Alberta to the above amendments to the Act. Specifically, the plaintiffs allege that the amendments unreasonably violate the right to freedom of expression under section 2(b) of the Charter.

In their challenge, the plaintiffs contend that the amendments:

• Prohibit “a range of expression” in environmental representations that constitutes “important information for the public to consider”, including representations that are “true, reasonable, or defensible in light of the known evidence”.
• Have a “chilling effect” on the expression of free speech by discouraging businesses from expressing  “information or viewpoints about the environment that may be perfectly lawful”.
• Place “extraordinary reverse onus” requirements on the party making the representation, requiring “vague and uncertain standards of verification” on “projections about future impacts or intentions” that “cannot be definitively proven or substantiated in advance”.
• Increase the likelihood of vexatious claims by permitting “private parties (e.g. opponents of businesses or industries) to directly bring a challenge … without needing to establish proof that the statement is false or materially misleading, or that they were in any way harmed by the statement.”
• Unequally limit free expression by targeting only businesses and industry and not their critics or opponents who “remain free to make negative or critical representations … they know to be incomplete, misleading, or unverified” and the government which is not subject to “any constraints in relation to representations about [its] own performance or future objectives in relation to the environment.”

Freedom of expression

The plaintiffs argue that the Act already prohibits false, misleading and deceptive representations and that the amended provisions as they pertain to environmental issues violates section 2(b) of the Charter as it limits free expression about environmental considerations, including counter arguments to current perceptions of climate change as well as making statements about a company’s climate-related goals and objectives. Specifically, they allege that the amendments are a “significant breach of freedom of expression – including the public’s right to hear, consider, and assess the expression in question”, which “cannot be justified on the basis of an alleged need to shield the public from false or misleading statements.”

Interestingly, in the case of Canada (Commissioner of Competition) v Gestion Lebski Inc (2006) (Gestion Lebski (2006)), the Competition Tribunal found that the defendants engaged in deceptive marketing practices related to a weight loss method, violating the Act’s provisions on false or misleading representations and performance claims not based on adequate and proper tests. In response, the defendants brought a constitutional challenge against sections 74.01(1)(a) and 74.01(1)(b) of the Act for infringement of freedom of expression under section 2(b) of the Charter. In this instance, the constitutional challenge was successful, but the plaintiffs have not referenced the case in their Statement of Claim.

Chilling effect

The Bill C-59 amendments “also create an additional ‘chilling effect’, by deterring the expression of information or viewpoints about the environment that may be perfectly lawful under the [amendments]”. The plaintiffs state several times that the Act will hinder “publicly-important” expressions “that may be true, reasonable, defensible, or verifiable”. In so doing, the amendments cause uncertainty with regard to the outcome of Tribunal processes, and that due to this “many businesses and industry associations will refrain making statements about the environmental impacts of businesses or industries at all, even statements that may turn out to have been based on standards of verification deemed acceptable by the government”.

Reverse onus with vague standards

The plaintiffs contend that the “chilling effect” is exacerbated by the “vague and uncertain standards of verification” required to prove that challenged claims are “adequately and properly” tested or substantiation by “internationally recognized methodology”. They argue that the broad “scope and effect” of the reverse onus requirements attached to environmental claims places an undue burden on business, which creates further uncertainty in Tribunal outcomes, especially when “projections about future impacts or intentions, by their very nature, cannot be definitively proven or substantiated in advance.” They assert that the methodology for verifying climate-related goals is not feasible and so cannot fully verify forward-looking information and, thus, opens business to litigation under the Act. This essentially prohibits “businesses from making public statements about their environmental goals, plans, or ambitions”, which “will deprive the public of important information they require in order to assess the impact of those businesses, and to inform their economic and democratic choices.”

Private party challenges

Litigation risk for businesses is further exacerbated by the amendment’s extension of private party challenges to section 74.01 of the Act. Although, private party challenges have been possible under the Act for other competition-related reasons, the plaintiffs argue that the Bill C-59 amendment significantly widen the scope and, therefore, “increases the likelihood that such claims will be brought for political or ulterior purposes by opponents of businesses or industries” “because they do not require challengers to have any basis to believe, much less an ability to prove, that the representations are in any way false or misleading” or “that [the challengers] were in any way harmed by the statement”.

One-sided application

They also claim that the amendments are one-sided, as NGOs seeking donations and politicians seeking election who make misleading statements “remain free to make negative or critical representations about products, businesses, and business activities – even claims they know to be incomplete, misleading, or unverified – without any statutory penalties or tribunal process requiring them to substantiate their claims”. This creates an imbalance in the Canadian debate around policy and the environment as “certain industries, including governments, can make unverifiable or even false claims about businesses or industries, while contrary information or opinions from the business community are silenced”. The effect of the amendments, is therefore, to seek to control the narrative on climate and stifle debate to “manipulate public opinion”.

As of publication, Canada had yet to file its Statement of Defence publicly.

Bureau guidelines regarding environmental claims

On 23 December 2024, the Bureau published its highly anticipated Draft Guidelines regarding Environmental claims and the Competition Act  (Draft Guidelines), which were open for public comment until 28 February 2025.

The Draft Guidelines sought to delineate the Bureau’s approach to environmental claims in light of the Bill C-59 amendments. Although the Act has led to “greenhushing”, with companies withdrawing their climate-related reports and claims, the Draft Guidelines provided much welcomed clarification on the scope of the new provisions stipulating; that “the Bureau’s focus is on marketing and promotional representations made to the public, rather than representations made exclusively for a different purpose, such as to investors and shareholders in the context of securities filings.” However, the Canada Climate Law Initiative’s (CCLI) submission to the consultation raised concerns about what would constitute public-facing materials and whether securities-related disclosures used as marketing materials would fall within the remit of the amendments.

The Draft Guidelines also supplied comprehensive explanations and examples on how each provision of section 74.01 on deceptive marketing practices would be considered when looking at environmental claims. Moreover, they outline six high-level principles to help businesses assess whether their environmental claims are in line with the requirements of the Act.

Explicitly, the Draft Guidelines stipulate that “claims about the future can be considered greenwashing if they represent little more than wishful thinking” and “businesses should ensure that such claims are well-founded and are adequately and properly substantiated in accordance with internationally recognized methodology.”

If businesses seek to make claims based on forward-looking information, they need to have a “concrete, realistic and verifiable plan” that is based on an understanding of the actions and interim targets required to achieve their claims.

In both the explanations and principles, the Bureau describe how they would view “adequate and proper” and “internationally recognized methodology”.

Adequate and proper is a flexible standard. The Bureau relies on the interpretation of the courts that construe adequate and proper “to mean fit, apt, suitable or as required by the circumstances”, having regard for the general impression that the representation communicates. The Bureau specified that the court interpretations will apply to section 74.01(1)(b) and 74.01(1)(b.1). In respect of section 74.01(1)(b.2) the Bureau acknowledges uncertainty in the court’s interpretation of “adequate and proper substantiation” but provides some explanation on what businesses can do to ensure they are within the law.

Internationally recognized methodology is a methodology recognized in two or more countries, irrespective of whether the methodology is recognized by the governments of those countries.

More details on the application of greenwashing provisions are detailed in the Bureau’s Frequently Asked Questions (FAQ) section, including further information on what constitutes internationally recognized methodologies, what businesses should do if there are no appropriate methodologies for the claim they seek to make, and substantiation of net-zero claims. Importantly, the FAQ notes that there is a due diligence defence to challenges to representation if companies can demonstrate that “they exercised due diligence to prevent deceptive marketing practices from occurring.”

Despite this, critics argue the Draft Guidelines lack the clarity and specificity businesses need to ensure compliance.

Clarifying, not creating: Bill C-59 builds on a longstanding legal standard

Contrary to claims in the constitutional challenge that the amendments introduce vague or novel requirements, Canadian courts have long required that advertising claims be supported by sound evidence.

For example, in R v Kachuk (1973), the Alberta courts required that “adequate and proper” testing be carried out by someone who is “properly trained … before the publication of the ad” for the requirements to be met.  

In R v Big Mac Investment Ltd (1988), the Manitoba courts confirmed that “when one interprets the ‘representations’ complained of, the specific words which are isolated and set forth in the charges, must be examined in the context of the entire interview or the advertisement, as the case may be. They must then be given the meaning that would be reasonably attributed to them by the average person who might be interested in using the type of product in question.”

In Canada (Commissioner of Competition) v Imperial Brush Co (2008), the Tribunal confirmed a non-exhaustive list of factors to consider when assessing whether a claim is supported by a “proper and adequate” test. These factors include:

• the interpretation of the claim by an average or “common” person;
• whether the test reflects the specific risk or harms the product is intended to prevent or help prevent;
• whether the test is conducted under controlled conditions that eliminate external variables or measurably account for them;
• the use of more than one independent sample whenever possible (noting that destruction testing may be an exception);
• while absolute certainty is not required, the results must be reasonable given the nature of the harm at issue and must establish that the product itself produces the intended effect materially; and
• the requirement to conduct adequate testing applies regardless of the size of the seller’s business or the expected sales volume.

The concept of “adequate and proper testing” has been applied on a case-by-case basis using the civil standard of a balance of probabilities. Contrary to the view that Bill C-59 imposes new obligations, the amendments clarify and reinforce a legal standard that has existed for decades. The courts have made it clear that truthful expression is not a shield for unsubstantiated commercial speech. Bill C-59 doesn’t rewrite this doctrine—it tailors it to environmental claims, reflecting the urgent need for integrity in climate-related marketing.

The legal boundaries of commercial speech in Canada

Case law has established that commercial speech, including advertising, is protected expression under section 2(b) of the Charter. In Ford v Québec (Attorney General) (1988), the Court asserted that “there is no sound basis on which commercial expression can be excluded from the protection of s. 2(b) of the Charter.” Similarly, in Guignard v Québec (2002), the Supreme Court of Canada held that

[i]n applying s. 2(b) of the Charter, this Court has recognized the substantial value of freedom of commercial expression.  The need for such expression derives from the very nature of our economic system, which is based on the existence of a free market.  The orderly operation of that market depends on businesses and consumers having access to abundant and diverse information.

These cases could substantiate the claims of the plaintiffs; however, it has also been ruled that freedom of speech is not absolute.

In R v 671135 Ontario Ltd (1994), the Ontario Supreme Court ruled that while the Act was an infringement on freedom of expression, the restriction was a justifiable one.  Justice MacKinnon asserted that:

[t]he right to freedom of expression does not confer a right to deceive potential customers with impunity, deliberately or blindly. The right to freedom of expression does not confer a right to make untested representations to the public. Advertising plays an important role in Canadian society. When advertising provides information, Canadian consumers must be able to count on the truth of the representation in order to make economic decisions. Parliament has restricted freedom of expression in … the Competition Act only as a collateral effect of its attempt to achieve its goal, namely the protection of the consumer and the promotion of healthy competition amongst businesses that is fair to consumers. The imposition of such a restriction on freedom of expression is justified in a society that is free and democratic. This restriction is critical in our society, given consumers’ vulnerability and the refinement of advertising techniques.

Likewise, in Rocket v Royal College of Dental Surgeons of Ontario (1990), the Court acknowledged the limitations to commercial expression under section 2(b) of the Charter, explaining that:

[r]egulation of advertising may offend the guarantee of free expression in s. 2(b) of the Charter, but this does not end the inquiry.  The further question of whether the infringement can be justified under s. 1 of the Charter must be considered.  It is at this stage that the competing values — the value of the limitation and the value of free expression — are weighed in the context of the case.  Part of the context, in the case of regulation of advertising, is the fact that the expression at issue is wholly within the commercial sphere.

More recently, in the case of Canada (AG) v JTI-Macdonald Corp (2007), the Chief Justice concluded “that the ban on false promotion, and particularly on promotion  ‘likely to create an erroneous impression’, is justified under s. 1 of the Charter as a reasonable limit on free expression”.

This jurisprudence suggests that regulating false or misleading commercial speech—especially in the interest of consumer protection—is a valid constitutional goal.

Free expression is not an absolute right. There are circumstances where the rights of opposing parties must be considered, and a balance struck. The courts have found that the right of the consumer not to be deceived outweighs the right of the business to freely express deceptions. The courts must take several steps to determine whether rights conferred by section 2(b) of the Charter have been infringed:

Determine whether the activity is protected by section 2(b) of the Charter.

1. Determine whether there is an infringement on the right to freedom of expression.
2. Whether the infringement can be justified under section 1 of the Charter guaranteeing that the rights and freedoms in the Charter will be “subject only to such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.”
3. Whether the impugned provisions proportionately address concerns that are “pressing and substantial”.

The law does not limit anyone from making a statement about the environment or their products as long as they are verifiable. If the expression is “true and verifiable” as detailed in the plaintiffs’ complaint, then it should be provable, thus limiting any liability for the expression. This has been a long-standing element of the Act prior to the aggrieved amendment. This, too, is acknowledged by the plaintiffs, who state that “representatives of businesses and industries were already prohibited from making statements that could be proven to be false or misleading”.

The “chilling effect” the amendments have on climate and environmental-related disclosure is an observed phenomenon following the implementation of Bill C-59. Many companies have withdrawn their statements, claims, and reports on climate change. Environment and Climate Change Canada (ECCC) also raised concerns regarding the amendments in their submission to the Bureau, stating “uncertainty around the announced amendments has led to some challenges for ECCC to encourage companies to voluntary [sic] adopt net-zero commitments under the Net-Zero Challenge.”

CCLI has also acknowledged the issue, asserting that “[w]hile companies must be careful with their statements to avoid greenwashing risks and the other risks arising therefrom, they should not fear or refuse to publicly disclose climate-related information. This practice is called greenhushing. Instead, companies should engage in real climate actions, avoid boilerplate disclosures, get third-party verification, and be transparent in their communications.”

Ambiguity and the reverse onus: are the critics right?

A key component of the AEG/ICBA challenge is that the terms “adequate and proper test” and “adequate and proper substantiation in accordance with internationally recognized methodology” are impermissibly vague.

Preceding the Bill C-59 amendments, there was a litany of constitutional cases brought against the Act on issues surrounding ambiguity and the reverse onus requirements. The most common arguments include that the ambiguity of the Act infringes on the individual’s rights under section 7 of the Charter to liberty and security, and that the reverse onus violates the right to presumption of innocence guaranteed under section 11(d) of the Charter (Gestion Lebski (2006); R v Wholesale Travel Group Inc (1991); R v Envirosoft Water Inc (1995)). The plaintiffs in this instance are not seeking to make a case of infringement of Charter rights under sections 7 and 11(d), presumably as previous cases have not been entirely successful.

Instead, the plaintiffs argue that the vagueness and reverse onus contribute to the infringement against freedom of expression under section 2(b) of the Charter. However, Canadian courts have consistently rejected ambiguity arguments where judicial interpretation has filled in the gaps.

R v Professional Technology of Canada Ltd (1986), the judge ruled that the  “phrase [adequate and proper tests] is as definite as possible in order to achieve the required purpose … the words are meaningful, reasonable, and completely capable of interpretation”.

In R v 671135 Ontario Ltd (1994), the Court upheld the requirement of “adequate and proper testing” under the Act, stating that it is not “so vague or lacking in precision or subject to discretionary determination that they constitute an unreasonable limit.”

Defence of the reverse onus provision is not novel either. The courts have upheld reverse onus clauses, particularly where the burden relates to knowledge within the control of the party making the representation. Courts have found such provisions constitutional where they are proportionate and justified in preventing public harm.

The court held in R v Envirosoft Water Inc (1995) that “requiring the accused to prove that which is within the accused’s sole knowledge, is proportional to the effects and importance of the legislation’s objective” and “the evidentiary burden on the accused under [the Act] is proportional to the benefit provided to the public by it.”

Balancing innovation, integrity, and expression

The plaintiffs in this case argue that the new anti-greenwashing rules suppress business speech. But the real risk lies in the absence of accountability, where unverifiable claims can crowd out genuine action and distort the marketplace.

While the constitutional challenge raises valid concerns about clarity and overreach, decades of case law suggest that Canadian courts may find the amendments to be justified limits on commercial speech.

As the case unfolds, it will test not only the boundaries of freedom of expression in Canada but also our collective commitment to environmental integrity and marketplace fairness. For now, businesses would be well advised to revisit their environmental claims—and ensure they’re backed by rigorous, defensible evidence.