Bill C-59: Criminal proceedings

This post is the last in a four-part series on investigation and enforcement proceedings for greenwashing claims under the Competition Act. Part One, “Balancing green goals with economic risks,” provides a general overview of the investigation and enforcement process for greenwashing claims under the Competition Act. Part Two, “From investigation to inquiry,” explores some of the key considerations for companies that may be under investigation by the Competition Bureau. Part Three, “Proceedings for deceptive practices,” focuses on civil proceedings for deceptive marketing practices, addressing the two new anti-greenwashing provisions and private right to action under the Competition Act.

In this final post, I’ll summarize the process for claims that proceed under the criminal deceptive marketing practices regime.

Following a formal inquiry into false or misleading deceptive marketing practices, the Competition Bureau (the Bureau) may decide to refer a matter for criminal prosecution to the Public Prosecution Service of Canada (PPSC). Unlike the civil track under the Competition Act (the Act), which deals with most instances of misleading representations and deceptive marketing practices, the criminal track deals with the most egregious matters.

To determine whether to refer the matter for criminal prosecution, the Bureau must satisfy the following criteria:

• There must be clear and compelling evidence suggesting that the accused knowingly or recklessly made a false or misleading representation to the public. An example of such evidence is the continuation of a practice by the accused after complaints have been made by consumers directly to the accused.
• If there is clear and compelling evidence that the accused knowingly or recklessly made a false or misleading representation to the public, and this evidence is available, the Bureau must also be satisfied that criminal prosecution would be in the public interest.

The factors to be taken into account in making this public interest determination will vary from case to case and may include the seriousness of the alleged offence and mitigating factors.

The seriousness of the alleged offence will include a consideration of:

1. Whether there was substantial harm to consumers or competitors that could not be adequately dealt with by available civil remedies.
2. Whether the deceptive practices targeted or took unfair advantage of vulnerable groups (e.g., children and seniors).
3. Whether the persons involved failed to make timely and effective attempts to remedy the adverse effects of the conduct, or whether the conduct continued after corporate officials became aware of it.
4. Whether the conduct involved a failure to comply with a previous undertaking, a promised voluntary corrective action or a prohibition order.
5. Whether the persons had engaged in similar conduct in the past.

Mitigating factors will include a consideration of:

1. Whether the consequences of a prosecution or conviction would be disproportionately harsh or oppressive.
2. Whether the company or entity has an effective compliance program in place.

If, on balance, the Bureau is satisfied that the circumstances of the case warrant criminal prosecution, a recommendation may be made to the PPSC, which will make the ultimate determination of whether to proceed.

As set out above, a company has committed a criminal offence if it knowingly and recklessly made representations to the public, or permitted a representation to be made or sent, that were false or misleading in a material respect while promoting a product or business interest.

To establish that a company contravened the criminal deceptive marketing practices regime under the Act, it isn’t necessary to prove that any person was actually deceived or misled, that the member of the public to whom the representation was made was within Canada, or that the representation was made in a place to which the public has access. The general impression and literal meaning of the representation will also be considered.

If the PPSC decides to proceed with criminal charges against a company for deceptive marketing practices, it may result in fines or, in the case of individuals, imprisonment.

Specifically, any person that is found to contravene the criminal deceptive marketing practices regime under the Act is guilty of an offence and is liable:

• On summary conviction, to a fine not exceeding $200,000 or, for individuals, to imprisonment not exceeding one year, or both.
• On indictment, to a fine in the discretion of the court or, for individuals, to imprisonment, not exceeding 14 years, or both.

The scope and magnitude of the new measures under the Act and the renewed public attention on greenwashing claims means that companies must remain vigilant in their internal processes. The implementation of mandatory ESG reporting laws, such as the Modern Slavery Act (and soon the Canadian Sustainability Disclosure Standards) increases legal risk for companies by imposing stricter disclosure standards—making misleading or unsubstantiated sustainability claims more likely to trigger regulatory scrutiny by way of complaints, investigations and enforcement. A failure to adapt could result in costly investigations and enforcement actions, jeopardizing both financial standing and reputation, and as outlined above, also result in criminal liability. Given the potential risks, it is crucial that companies update their internal processes and ensure that their public reporting undergoes regular legal review on an annual basis.

Please note this publication presents an overview of the investigation and enforcement proceedings for deceptive marketing practices under the Competition Act. It is for informational purposes only and is not a replacement for legal advice. If you need guidance, please contact our ESG Legal Risk and Disclosure team to explore how we can help you navigate your legal