Competition Law and Environmental Sustainability

Introduction

Competition law and environmental sustainability increasingly interact because businesses are under pressure to reduce emissions, improve recycling, adopt cleaner technology, and cooperate on environmental projects. At the same time, competition law prevents businesses from using environmental objectives as a justification for price fixing, market allocation, exclusionary practices, misleading advertising, or anti-competitive mergers.

In Canada, the Competition Act therefore performs two connected functions. It protects competition while allowing legitimate environmental initiatives, and it protects consumers from misleading environmental representations commonly described as greenwashing.

The modern approach is not that competition and sustainability are opposing objectives. Properly designed competitive markets can encourage innovation in renewable energy, recycling, low-carbon products, cleaner transportation, and resource efficiency.

Legal and Regulatory Framework

Environmental sustainability can arise under several parts of the Competition Act.

First, section 45 prohibits serious forms of agreements between competitors, including agreements to fix prices, allocate markets, or restrict output. An agreement does not become lawful simply because the parties describe it as environmentally beneficial.

Second, section 90.1 deals with agreements that prevent or lessen competition substantially. Sustainability collaborations involving common environmental standards, joint infrastructure, recycling systems, or emissions-reduction arrangements may therefore require competition-law analysis.

Canadian law now provides a particularly important mechanism in section 124.3. Businesses proposing an agreement for the purpose of protecting the environment can seek an advance certificate from the Commissioner of Competition. A certificate may be issued where the Commissioner is satisfied that the agreement is intended to protect the environment and is not likely to prevent or lessen competition substantially. A registered certificate can protect the arrangement from specified conspiracy, bid-rigging, and civil competitor-agreement provisions, provided the parties comply with its terms.

Greenwashing and Environmental Advertising

Competition law also regulates what businesses say about sustainability.

Paragraph 74.01(1)(a) prohibits materially false or misleading representations. The law considers both the literal words used and the general impression created by an advertisement.

Paragraph 74.01(1)(b.1) specifically addresses claims about the environmental benefits of products. Such representations must be supported by an adequate and proper test.

Paragraph 74.01(1)(b.2) concerns representations about environmental benefits associated with a business or business activity. Such claims must be supported by adequate and proper substantiation. As of 2026, the legislation no longer requires that substantiation to be made according to an internationally recognized methodology.

Consequently, expressions such as “carbon neutral,” “zero emissions,” “100% recyclable,” “sustainable,” or “environmentally friendly” can create competition-law risks when the evidence does not support the impression communicated to consumers.

Environmental Cooperation Between Competitors

Cooperation may sometimes be necessary to solve environmental problems. Competitors might jointly develop recycling infrastructure, establish interoperable charging networks, create industry-wide waste-reduction systems, or develop environmental technical standards.

Competition law distinguishes legitimate cooperation from disguised cartel conduct. Important factors include whether:

cooperation is genuinely necessary to achieve the environmental objective;

firms remain free to compete on price and other commercially important matters;

commercially sensitive information is unnecessarily exchanged;

participation excludes competing technologies or businesses;

the agreement restricts output beyond what is necessary; and

less restrictive alternatives could accomplish the environmental objective.

The environmental certificate mechanism is particularly useful where competitors want greater certainty before establishing such an arrangement.

Case Laws

1. Tervita Corp. v. Canada (Commissioner of Competition), 2015 SCC 3

Tervita involved the acquisition of a company holding a permit for a hazardous-waste landfill in northeastern British Columbia. The Supreme Court concluded that the transaction was likely to prevent competition substantially but allowed the appeal under the efficiencies framework then contained in the Act.

The case is especially relevant because environmental and waste-management considerations appeared alongside competition analysis. It demonstrates that environmental benefits or costs must be carefully distinguished from the competitive effects required by the statute.

Tervita's former efficiencies defence must now be read historically because Parliament subsequently changed Canada's merger regime and removed the former standalone section 96 defence.

2. Canada (Commissioner of Competition) v. Superior Propane Inc., 2001 FCA 104

Superior Propane concerned a merger between major propane suppliers. The Federal Court of Appeal examined how efficiencies should be balanced against anti-competitive effects under the former merger regime.

Its broader significance for environmental sustainability is the recognition that competition analysis may involve complex economic benefits rather than price alone. Environmental efficiencies, technological improvements, or resource savings may be economically relevant where permitted by the current statutory framework, although Superior Propane's former section 96 framework is no longer the current merger defence.

3. Richard v. Time Inc., 2012 SCC 8

The Supreme Court emphasized the importance of the general impression conveyed by advertising rather than concentrating only on its literal wording.

This principle is highly important for greenwashing. A statement may contain technically accurate words but still create the overall impression that a product or company is substantially greener than it actually is. Environmental images, labels, qualifications, packaging, and surrounding language therefore matter.

4. Commissioner of Competition v. Chatr Wireless Inc., 2013 ONSC 5315

Chatr concerned advertising claims regarding wireless-network performance. The court held that adequate and proper testing must support a performance representation and examined whether testing had been completed before claims were made.

Although the case was not environmental, its testing principles are directly relevant to modern environmental product claims under s. 74.01(1)(b.1). Businesses should possess appropriate evidence before advertising measurable environmental performance.

5. Canada (Commissioner of Competition) v. Imperial Brush Co., 2008 Comp. Trib. 2

Imperial Brush is another important authority concerning “adequate and proper” testing. It established that testing must genuinely relate to the representation being made and must exist before the representation is communicated.

The principle has obvious application to claims involving biodegradability, energy efficiency, emissions reductions, durability, recyclability, or other measurable environmental characteristics.

6. Canada (Commissioner of Competition) v. Sears Canada Inc., 2005 Comp. Trib. 2

Sears Canada dealt with deceptive marketing and the way consumers understand commercial representations. The case reinforces the principle that competition law protects the integrity of consumer decision-making.

Its reasoning is relevant to environmental marketing because sustainability increasingly influences purchasing decisions. Misleading businesses can gain an artificial competitive advantage over competitors that incur genuine costs to produce environmentally preferable products.

Environmental Enforcement Examples

Two important Canadian enforcement matters demonstrate the practical importance of these principles.

In the Volkswagen/Audi emissions matter, the Competition Bureau concluded that consumers had been misled by environmental marketing concerning “clean diesel” vehicles and emissions. Volkswagen and Audi entered consent agreements involving substantial penalties and consumer compensation arrangements.

In the Keurig Canada matter, claims concerning the recyclability of single-use coffee pods attracted Competition Bureau action because the pods were not widely accepted by municipal recycling systems in much of Canada. Keurig agreed to a $3 million penalty and other corrective measures.

These matters illustrate that environmental advertising can directly affect competition because unsupported claims may divert environmentally conscious consumers away from businesses whose products actually provide the claimed benefits.

Competition, Innovation and Sustainability

Competition itself can advance environmental objectives. Rivalry encourages businesses to develop cleaner technologies, more efficient production processes, electric transportation, renewable-energy systems, low-carbon materials, and improved recycling methods.

However, sustainability should not become a convenient justification for eliminating rivalry. For example, competitors cannot normally agree to increase prices merely by saying the additional revenue will finance sustainability projects. Nor should industry environmental standards be designed to exclude innovative competitors or favour incumbent technology.

The correct approach is therefore based on proportionality and competitive necessity: environmental cooperation should go no further than reasonably necessary to achieve the legitimate sustainability objective.

Conclusion

Canadian competition law increasingly recognizes the connection between healthy competition and environmental sustainability. The Competition Act now directly addresses unsupported environmental claims and also establishes a specific advance-certificate process for legitimate environmental collaboration between businesses.

The central principle remains that sustainability cannot be used as a shield for anti-competitive behaviour. Environmental collaborations should preserve rivalry wherever possible, while environmental marketing must be truthful and supported by appropriate evidence.