On January 6, 2022, the Competition Bureau (Bureau) announced that it had negotiated a consent agreement with Keurig Canada Inc. (Keurig) regarding concerns over allegedly false or misleading recyclability claims on its website, social media platforms, texts and logos for its single-use coffee pods (K-Cup pods).
In making the announcement, Canada’s Commissioner of Competition said:
“Portraying products or services as having more environmental benefits than they truly have is an illegal practice in Canada. False or misleading claims by businesses to promote “greener” products harm consumers who are unable to make informed purchasing decisions, as well as competition and businesses who actually offer products with a lower environmental impact.”
The general civil and criminal misleading advertising provisions of the federal Competition Act (sections 52 and 74.01) prohibit false or misleading advertising to promote any product or business interest and are broad enough to apply to false or misleading environmental claims (sometimes also referred to as “greenwashing”).
The general misleading advertising provisions of the Competition Act can also apply to both literally false claims and misleading claims. In determining whether an advertising claim is false or misleading, sections 52(4) and 74.03(5) of the Competition Act provide that the general impression of a representation, which can include the overall impression to consumers created by images, logos or packaging and labelling, is also relevant.
In this case, the Bureau concluded that Keurig’s single-use K-Cup pod recyclability claims were false or misleading under section 74.01 of the Competition Act, particularly in municipal recycling programs outside the provinces of British Columbia and Quebec where they are not accepted for recycling. The Bureau also found that the company’s claims relating to steps to prepare the pods for recycling (by peeling the lid and emptying the coffee grounds) were also false or misleading in local recycling programs that require additional steps to recycle the pods.
As part of its settlement under the consent agreement negotiated with the Bureau, Keurig agreed to: (i) pay a $3 million administrative penalty; (ii) pay $85,000 for the Bureau’s investigation costs; (iii) donate $800,000 to a Canadian charitable organisation focused on environmental causes; (iv) change Keurig’s recyclable claims and its packaging of K-Cup pods; (v) enhance its corporate compliance program; and (vi) publish corrective notices about the recyclability of its product on a wide range of platforms and publications (e.g., its websites, social media, new brewing machines packaging, e-mail to subscribers and in national and local news media). The settlement also applies to recyclability claims on K-Cup pods by brands marketed in partnership with Keurig.
While the administrative penalty is relatively modest compared to previous greenwashing settlements (discussed below), the consent agreement under section 74.12 of the Competition Act imposes additional requirements for Keurig. This includes issuing extensive corrective notices across its websites, social media platforms, in local and national daily newspapers and in digital editions of daily newspapers, adding mandatory disclaimer and qualifying language (e.g., “recyclable in select locations” and “may not be recyclable in your area”) in K-Cup pod representations and new packaging for numerous products, including those made available by Keurig’s partners.
The Bureau has actively enforced and provided guidelines on false or misleading environmental claims. In December 2016, the Bureau settled a proposed class action against Volkswagen and Audi in which the two companies agreed to pay $2.1 billion to consumers and a $15 million penalty for allegedly false or misleading environmental marketing claims regarding certain 2.0 litre diesel engines.
In January 2017, Bureau issued a business alert (It’s not easy being green. Businesses must back up their words) taking the position that businesses must ensure that environmental claims: (i) are not misleading or likely to result in misinterpretation; (ii) are accurate and specific; (iii) are substantiated and verifiable; (iv) are relevant; and (v) do not include false or misleading endorsements from third parties.
In January 2018, the Bureau also settled a proposed class action against Volkswagen, Audi and Porsche in which the three companies agreed to pay up to $290.5 for allegedly false or misleading environmental marketing claims to promote certain vehicles with 3.0 litre diesel engines.
This case illustrates that it is important for advertisers to not only ensure that their marketing claims are true in all relevant areas where their products are sold (i.e., ensure that blanket claims are not made if exceptions require disclaimer language) but also that the general impression of key marketing claims is not false or misleading, such as through the use of images or symbols (e.g., the recycling symbol that was one of the issues challenged by the Bureau in this case). The case is also a reminder that false or misleading environmental and greenwashing claims remain an ongoing enforcement priority for the Bureau.
There are several ways in which companies can mitigate deceptive marketing practices under the Competition Act. The use of disclaimers in advertising can add information to or qualify broad advertising claims, including environmental claims. While disclaimers can be a very useful and legitimate tool for advertising, they can also violate the general civil or criminal misleading advertising provisions of the Competition Act (e.g., where a disclaimer itself includes false or misleading claims). It is generally good practice to use disclaimers to qualify or add to a headline claim, ensure that they are in close proximity to the main claim and can be easily read and understood by consumers.
Developing and implementing an effective and credible competition law compliance program also plays a crucial role for corporations to mitigate risk, including complying with the deceptive marketing provisions of the Competition Act. Some of the key benefits of a competition law compliance program include reducing the risk of violating the Competition Act, reducing the costs of investigations and proceedings should they occur and potentially mitigating penalties under the Bureau’s Leniency Program in the event of a criminal investigation.
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