On January 6, 2022, the Competition Bureau of Canada (the “Bureau”) released an announcement that it reached an agreement with Keurig Canada Inc. (“Keurig”) to resolve concerns over false or misleading environmental claims made to consumers about the recyclability of Keurig’s single-use Keurig coffee K-Cup pods (the “pods”).

Competition Bureau Investigation Findings

The Bureau investigated Keurig’s claims about the recyclability of their pods made on Keurig’s website, via its social media and on text and logs on the pods and packaging.

The Bureau concluded that Keurig’s claims were false or misleading in areas where the pods are not accepted for recycling. Except within British Columbia and Quebec, the pods are not currently widely accepted in municipal recycling programs across the country.

The Bureau further concluded that Keurig’s claims about the steps involved to prepare the pods for recycling were false or misleading in some municipalities. Keurig’s claims give the impression that consumers can prepare the pods for recycling by peeling the lid off and emptying out the coffee grounds. However, some local recycling programs require additional steps to recycle the pods.

Terms of the Settlement

As part of the settlement with the Bureau, Keurig agreed to do the following:

• To pay a $3 million penalty and donate $800,000 to a Canadian charitable organization focused on environmental causes
• Pay an additional $85,000 for the costs of the Bureau’s investigation
• Change its recyclable claims and packaging of the pods
• Publish corrective notices about the recyclability of its products on its websites, on social media, in national and local news media in the packaging of all new brewing machines and via email to its subscribers
• Enhance its corporate compliance program as necessary to promote compliance with the laws and prevent deceptive marketing issues in the future

Keurig’s settlement with the Bureau also covers recyclability claims made on packages of pods for brands marketing in partnership with Keurig.

The settlement agreement is registered with the Competition Tribunal and has the force of a court order. It is binding for a period of five years.

In its release about the settlements, the Bureau acknowledged Keurig’s voluntary cooperation in resolving the matter.

False or Misleading Representations Under the Competition Act

The Competition Act in Canada contains provisions addressing false or misleading representations in promoting the supply or use of a product or any business interest. It states as follows:

No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.

What is “Material”?

If a representation could influence a consumer to buy or use the product or service advertised, it is material. To determine whether a representation is false or misleading, the courts consider the “general impression” it conveys, as well as its literal meaning, pursuant to the Competition Act.

What is a Representation?

For the purposes of the Competition Act a representation that is:

• expressed on an article offered or displayed for sale or its wrapper or container
• expressed on anything attached to, inserted in or accompanying an article offered or displayed for sale, its wrapper or container, or anything on which the article is mounted for display or sale
• expressed on an in-store or other point-of-purchase display
• made in the course of in-store or door-to-door selling to a person as ultimate user, or by communicating orally by any means of telecommunication to a person as ultimate user, or
• contained in or on anything that is sold, sent, delivered, transmitted or made available in any other manner to a member of the public
• is deemed to be made to the public by and only by the person who causes the representation to be so expressed, made, or contained, subject to the Competition Act.

A person who, for the purpose of promoting, directly or indirectly, the supply or use of a product or any business interest, supplies to a wholesaler, retailer, or other distributor of a product any material or thing that contains a representation of a false or misleading nature referred to above is deemed to have made that representation to the public.

To establish the offence of false or misleading representations under the Competition Act, it need not be proven that:

• Any person was deceived or misled
• Any member of the public to whom the representation was made was within Canada
• The representation was made in a place to which the public had access.

Offence and Punishment

The Competition Act provides two adjudicative regimes to address false or misleading representations: the criminal regime and the civil regime.

Under the criminal regime, an allegation of false or misleading representation is brought before a criminal court and must be proven beyond a reasonable doubt. Pursuant to the Competition Act any person found guilty is liable:

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

Under the civil regime, certain practices may be brought before the Competition Tribunal, the Federal Court or the superior court of a province and require that each element of the conduct be proven on a balance of probabilities. The court may order a person to cease the activity, publish a notice and/or pay an administrative monetary penalty. On first occurrence, individuals are liable to penalties of up to $750,000 and corporations are liable to penalties of up to $10,000,000. For subsequent occurrences, the penalties increase to a maximum of $1,000,000 for individuals and $15,000,000 for corporations. In situations where a person has made materially false or misleading representations about a product to the public, the court may also make an order for restitution, requiring the person to compensate consumers who bought such products, and an interim injunction to freeze assets in certain cases.

Oakville Business Lawyers Helping Clients In Commercial Litigation Matters

False or misleading advertisements could have a huge impact on a company and business. At Campbells LLP, our skilled team of business lawyers can advise your business and assist with a range of business disputes. We have extensive experience representing clients before regulatory bodies and administrative tribunals. To speak with one of our commercial litigators, contact us online or at 905-828-2247 to schedule a consultation.