Judge quashes attempt to halt sale of Mountain Equipment Co-op

The Canadian retailer had been struggling financially and announced its sale to a US private investment firm last month

Attempts by members of Canadian outdoor leisure retailer Mountain Equipment Co-op (MEC) to halt its sale have been thrown out by a judge in British Columbia.

The members wanted the sale delayed but their application was rejected by Supreme Court Justice Shelley Fitzpatrick, who approved the sale.

The retail co-op, which has run into financial problems which were worsened by the Covid-19 crisis, announced its demutualisation and sale to US investor Kingswood Capital last month.

Members reacted furiously to news of the sale – launching an online petition to save MEC as a co-op and drumming up support through the SaveMEC / SauvonsMEC Facebook group.

They have argued that the sale of MEC – which at the time this article went live still hosted a page dedicated to its co-op status and advertising $5 memberships – was made without proper consultation of members. Allegations have also been made over management attempts to influence board elections, and a deviation from the co-op’s founding purpose in its stores’ stocking policy.

Their legal challenge was mounted in collaboration with the B.C. Co-op Association, Alberta Community and Co-operative Association and Co-operatives and Mutuals Canada, “to protect the integrity of the co-op model and to put member rights at the forefront of the transaction.”

Their campaign also drew support from the International Cooperative Alliance, with a letter from director general Bruno Roelants – who said it was crucial that members were able to “exercise their rights in this critical juncture”.

“Any decision regarding the sale and termination of the co-operative cannot be taken without the approval of the members’ assembly,” he said. “Members should be able to exercise their rights to democratic member control (2nd co-operative principle) and ownership (member economic participation, 3rd co-operative principle) and seek a viable solution through co-operation among co-operatives (6th co-operative principle).”

He added: “Co-operative members are not simply clients, but the co-owners of the cooperative enterprise that they control democratically.” 

But in a response filed to the court, MEC doubted the group’s ability to address the business’s cash flow issues, noting that the proposed sources of potential funding don’t involve “concrete commitments or realistic options.”

It says the sale to Kingswood “strengthens MEC’s finances and core operating business, preserves jobs, retains the vast majority of MEC’s locations and guarantees members continued access to authentic advice and high-quality products at competitive prices.”

Kevin Harding – spokesperson for Save MEC – said the court’s decision was “deeply disappointing”.

He added: “We are working with our friends at Co-ops and Mutuals Canada to understand any legal options – there are fundamental legal principles at stake relating to co-ops. We are thinking of our adventure buddies and neighbours, the MEC employees all across the country who shared our co-op’s values of quality, integrity, co-operation, creativity, leadership, sustainability, stewardship, humanity and adventure.

“The sale of MEC to Kingswood absolutely breaks our trust – and Kingswood has asked us to trust them that they will live up to their commitments and our values. We will be watching Kingswood closely so that they meet their commitment to retain 75% of MEC employees. We must support all members of our MEC community, during a difficult transition time of corporate restructuring and a pandemic.”

He thanked the campaign’s volunteers and supporters and told them: “Do not lose this momentum as member-owners! We cannot have co-ops diminish any more democratic control, economic participation, education, training and information or other key co-op principles. Governments must take action to prevent this from ever happening again.

“Exercise your rights and responsibilities in the numerous other co-ops and credit unions you belong to. Many leaders in these member-owned organisations over the last two weeks have absolutely believed in the rights of members, and understand our enormous contribution to Canada’s economy. Many others were completely silent, and you own and control those co-operatives too.

“Continue to keep in touch with your other co-ops and credit unions, hold them accountable to your shared values, make member representation and inclusivity matter now more than ever. Let’s work with each other to build and keep co-ops strong – as real examples of business done better, as sites of democracy in our economy, and as organisations that are ours.

 Save MEC hosts a virtual town hall event on at 5pm Pacific Time on Monday, 5 October, to “discuss the fate and future of MEC and member-owned co-operatives in Canada”.