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Canada: Government’s fight against junk fees, savings claims and greenwashing heats up with new proposed amendments

Recent Regulations & NewsCanada: Government’s fight against junk fees, savings claims and greenwashing heats up with new proposed amendments

Newly proposed amendments to Bill C-59, Fall Economic Statement Implementation Act, 2023 (“Bill C-59”), introduced by the Standing Senate Committee on National Finance on 2 May 2024 (“Standing Committee Amendments“), seek to further toughen rules on drip pricing (including so-called ‘junk fees’), savings claims and greenwashing under the Competition Act (“Act”).

The Standing Committee Amendments propose to expand on the Bill C-59 amendments to the deceptive marketing provisions of the Act discussed in our previous Advantage client alert, and include the following key amendments:

Restricting the scope of the current exemption under the drip pricing prohibition to further reduce junk fees.

Shifting the burden of proof for establishing the ordinary selling price of a product from the Commissioner of Competition (“Commissioner“) to the party making the representation.

Expanding the prohibition against greenwashing to capture claims about the environmental performance of a business or its business activities, such as carbon neutral and net-zero claims, in addition to product claims.

Drip pricing

Although drip pricing was informally considered a deceptive marketing practice under the Act for a number of years, the Act was amended in 2022 to explicitly identify drip pricing as a prohibited practice.1 Drip pricing, which involves offering a product or service at a price that is unattainable due to the requirement for a consumer to pay additional charges or fees (often referred to as ‘junk fees’), are permitted only if the unattainable price is due to fixed mandatory charges or fees (such as taxes and levies) that are imposed by a federal or provincial government. However, the Act does not currently specify on whom such charges and fees must be imposed on for the exemption to apply.

The Standing Committee Amendments seek to further restrict this exemption by clarifying that only government-created charges and fees that are imposed directly on an end purchaser will benefit from the drip pricing exemption. In other words, the only amounts that can be excluded from an advertised price are amounts (such as sales taxes or consumer environmental levies) imposed on an end purchaser and not fees payable by an advertiser, effectively creating an all-in price retail pricing regime on the federal level in Canada.

Ordinary selling price

Currently, the Act prohibits advertisers from making materially false or misleading representations to the public about the ordinary selling price (OSP) of a good or service. The provision prohibits advertisers from continuously or constantly claiming that a product is on sale, with the result that the ordinary (or original) price is not the bona fide regular price, and the sale claim is then false or misleading.2 Under the existing prohibition, the Commissioner has the onus of establishing that the sale price is false or misleading.

The Standing Committee Amendments would create a reverse onus such that the advertiser would be required to establish the OSP – making it easier for the Competition Bureau (“Bureau”) to challenge prohibited OSP representations.

Environmental claims

The Standing Committee Amendments also expand the application of Bill C-59’s greenwashing prohibition, which currently proposes to prohibit product-based greenwashing representations related to environmental and ecological claims that are not adequately substantiated.3 However, critics have argued that Bill C-59 does not go far enough, as it would not apply to more general environmental claims in the form of business commitments, such as carbon neutral, net zero, and other types of environmental, social, and governance (ESG) claims.

The Standing Committee Amendments expand the proposed greenwashing amendment to prohibit representations that protect or restore the environment or that mitigate the environmental, social and ecological causes or effects of climate change, where these are not based on an adequate and proper test. This change will expand the application of the greenwashing prohibition to broader environmental and social claims and target unfounded ESG business commitments.

Since our last installment of this Advantage series, Bill C-59 has quickly moved through Canada’s Parliament and we anticipate it will receive Royal Assent before Parliament’s summer recess, which begins in late June.

Therefore, while not yet final, advertisers should consider how the proposed amendments may affect their marketing and advertising practices by ensuring appropriate compliance training with respect to the new developments, and look out for further communications and updates from us regarding these amendments.

* * * * *Madison Bruno, Articling Student, has contributed to this legal alert.

1 For more information on the drip pricing prohibition recently added to the Act’s deceptive marketing provisions, see our client alert here.
2 For more information on the current ordinary selling price provision, including the relevant tests required to determine the OSP, see our client alert here.
3 For more information on the Bill C-59 greenwashing provision, including a discussion on the adequate and proposer test, see our ADvantage client alert here.

Story from globalcompliancenews.com

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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