As a member in MEC, I exist in two different forms. I am a customer for a retail outlet and I am a member (shareholder) in a cooperative.

Why it Didn’t Matter – Why it Does Matter

Until the sale is finalized, my existence in two forms does not matter, the two are one and the same. To use a Star Trek analogy, they share the same time and space quite happily. My purchases at MEC contributed to my standing as a member. My standing as a member contributed (via voting, etc.) to what I could purchase. However, if my customer-self is separated from the Cooperative-self then there is a conflict (think a transporter malfunction if we are still in the Star Trek analogy universe).

Be Careful What You Agree to Sell

In a previous blog, a note to MEC’s creditors: MEC Debt Matters, I provided the following comment if they agree to the sale:

Be Careful What You Agree to Sell. Finally, what exactly is being sold? If it is MEC’s physical assets (buildings, inventory, fixtures, etc.), that is one thing. If the details of the 5 million members are being sold, then you have a problem. I have agreed to share my purchase history, home address, etc. with a cooperative. I have not agreed to share this information with anyone else, in particular an American retailer. …

Since that blog, I had the opportunity to examine the Asset Purchase Agreement of the sale [1, pp. 474-711]. The agreement included the usual assortment of physical and financial assets [2]. What is not clearly articulated is the sale of the information related to me in my two forms. The nearest I could get are these two references:

• Information Technology “… including …input data” [2, 500].
• Express Consents – Canada’s Anti-Spam Law [2, p. 502].

The agreement does provide assurances that the new owner of the assets will communicate with members and… “Additionally, the Buyer is thoughtfully planning various initiatives to provide value and benefits to members to demonstrate its commitment to them and the brand.” [3, p. 512].

The agreement does provide assurances that the new owner will communicate with members: “Additionally, the Buyer is thoughtfully planning various initiatives to provide value and benefits to members to demonstrate its commitment to them and the brand.” [3, p. 512].

The sales agreement seems to be a good contract if say Zellers was being sold to Target [6]. As a MEC customer, I might appreciate my sales history being maintained if I owned equipment still under warranty. Conversely, I may not want the new owner to know what I previously bought.

Permission to Keep You As a Customer?

The contract acknowledges the obligations all parities have to conform to relevant privacy and personal information laws [4, 5]. One question would be which laws do these refer to? MEC and the buyer are registered in British Columbia, its subsidiary is registered in Ontario [1, p. 474] and the inter-provincial and international nature indicates federal legislation would apply [7]. Assuming federal legislation prevails, then “Principle 3 – Consent” is relevant including the following comments [8]:

• … Organizations are generally required to obtain meaningful consent for the collection, use and disclosure of personal information.
• To make consent meaningful, people must understand what they are consenting to. It is only considered valid if it is reasonable to expect that your customers will understand the nature, purpose and consequences of the collection, use or disclosure of their personal information.

My existence as a MEC customer was based on a social and economic ‘contract’. I would buy a $5 share and thus have the privilege to shop at MEC (retail, online, etc.).  Part of this contract is the ability to have a say in the future of the organization as a MEC Shareholder. I willingly consented to the above by shelling out the $5 and continuing to buy from MEC.

If MEC is sold then the basis of that consent has changed. I may choose to remain a customer but may choose not to. The new owner is in a Schrödinger’s cat [9] predicament. It would seem that it needs to ASK me if I want to be a customer as opposed to ASSUME that I will continue to be one. As an individual it is unrealistic that I would go around to the new seller and ask questions like “Do you now have my personal information?”, “Can you tell me how you are going to use this information?”, “Will it continue to be stored in Canada and be subject to Canadian privacy laws?”.

If the new owners of MEC need to ask me then presumably they need to ask the other 5.7M MEC Customers/Shareholders. Ideally, it is not the new owner who is asking this question but the old cooperative. If it is the old cooperative asking this question, then should it not also ask if we, the members, approve the sale in the first place?

Umm, We’re Still a ‘Thing’, Right?

Seemingly absent from the purchase agreement is exactly what happens to the cooperative after the sale. It can’t use the MEC name, it will own few assets but it will still have 5.7M members. Remember that I exist in two forms in MEC, as a customer and a member. Whether I choose to be a customer with the new owner does not change my affiliation with the cooperative. This is enshrined in the purchase agreement by excluding corporate records from the sale including ‘… member registers, share ledgers…‘. [2, p. 504, 2.2(a)].

So, does that mean as a cooperative we can still hang out together, communicate with each other or even start an outdoor equipment shop in someone’s basement? Is a consent renewal required or is a 50-year tradition as a cooperative sufficient to imply consent?

Closing Thoughts and Potential Questions

Perhaps selling off the retail arm of the cooperative is not such a bad thing. It would have been better to do so without resorting to a fire sale. Such considerations are the subject of a future blog. In the meantime, some questions that are worth pondering:

1. Given the substantive change in the organization and to be compliant with relevant privacy laws, does new-MEC need to acquire consent to transfer customer records to the new owner?
2. If yes to the above question, can this request for consent also be used to approve the sale of the assets (a vote of confidence if you will)?
3. In the case of a non-response (e.g. an email sent and there is no response to it), is the assumption that this former MEC member is providing an implicit Yes or an implicit No? Ideally ‘No’ is the default response.
4. How will old-MEC extract ‘No’ customers from its information systems?
5. Does the cooperative survive post sale and will it need to reconfirm its membership rolls give that its primary benefit (stores) have been sold?
6. Can the cooperative engage in membership activities post sale such as raising capital, communicating information or even creating a competing business to the new-MEC?

A Big Fat Obvious Caveat

I am reading the various contracts and legal documents as a layman. I have no legal training although I have had to bumble my way around a contract or two. The documents are beefy (700+ pages), so I may make an assertion that is included in some sub-sub-sub clause that I missed. If you are an able sub-chaser and notice something I misconstrued, let me know and I will change it forthwith!

Notes and References

1. Alvarez & Marsal (A&M): First affidavit of Philippe Arrata, At 711 pages and 30MB, it is a beast!
2. Ibid, Article 2.
3. Ibid, 3.5 Member Benefits, p. 512
4. Ibid, 7.1 Personal Information, p. 524.
5. Ibid, 11.1 Confidentiality and Transaction Personal Information, p. 544
6. Wikipedia: Zellers.
7. Office of the Privacy Commissioner of Canada: Summary of privacy laws in Canada; All businesses that operate in Canada and handle personal information that crosses provincial or national borders are subject to PIPEDA regardless of which province or territory they are based in..
8. Office of the Privacy Commissioner of Canada: PIPEDA Fair Information Principle 3 – Consent.
9. Wikipedia: Schrödinger’s cat.