Forced arbitration with Smartwool socks

Smartwool email advising consumers of changes to arbitration agreement and process for sending USPS Priority Mail or hand delivery within 30 days.

On March 29, 2024, Smartwool emailed customers in their database to automatically opting them in to their new terms of use that included a forced arbitration clause. applied forced arbitration to their terms of service.

Background

Smartwool is an American clothing company specializing in of wool clothing. The incident described in this article is a example of post-purchase EULA (End User License Agreement) modification (colloquially referred to as "EULA roofieing") that includes a revised forced arbitration clause. To illustrate the magnitude of risk posed by a clothing-related EULA, one can imagine a less responsible company accidentally including toxic dyes or coatings due to supply chain mishaps. In such a case they might avoid paying damages to the harmed consumers.

This instance of post-purchace EULA modification is a very good example of the strategic use of asymmetry. The business delivered their opt-in in a inexpensive, unexpected, and casual nature. The consumer has to do absolutely nothing to opt-in, and they can opt-in without reading it. Opting out is difficult, tedious and relatively expensive.

Post-purchase EULA modification

On March 29, 2024 Smartwool emailed a list of their account holders stating that they were opting them into forced arbitration, and to opt out, they were required to send a letter through USPS Priority Mail. So, in addition to being a post-purchase action, the customers were opted in via email and could not simply reply to the email to opt out.

This requirement is in itself more involved than the process of opting in but, additionally, USPS Priority is not the First Class mail that people typically use for mailing letters. This (seemingly minor) difference in mail type is the difference between a $0.56 postcard and a $10.10 Flat Rate Envelope at the time of writing., preying on an individual's reasoning that the effort involved in attempting to opt-out is not worth the time or money.

Differences between pre-purchase and post-purchase EULA

According to the EULA available before the opt-in wave of emails, the original EULA available on Smartwool's website stated:

1. A higher priority on contacting Customer Service first but, does not explicitly make it a prerequisite before arbitration.
2. No specification on who determines arbitrability.
3. AAA rules apply and outlines fee reimbursement if the claim is under $10,000.
4. A specific line reading: "Any dispute or claim relating in any way to the Website and our services, any representations made by us, and/or your use of our websites [...] will be resolved by binding arbitration, rather than in court..." This line does not specify products sold by the company, which would be the most likely cause of a class-action lawsuit.

The new EULA terms lock down on the existing terms, and state:

1. An informal dispute resolution process where the complaining party must send a written notice describing the dispute and allow 30 days for resolution before arbitration can begin.

   

   Text from the EULA as it appeared.

   Your opt-out notice must be sent to General Counsel at the address below via USPS Priority Mail or hand delivery within 30 days of receiving this notice, and shall include your name, address, and the same email address you used to create an account with us and an unequivocal statement that you wish to opt out of the updated Terms of Use. Opt-out notices sent via email will not be effective.

2. The arbitrator has the authority to determine issues of arbitrability, including scope, validity, and enforceability.
3. AAA Consumer Arbitration Rules and Mass Arbitration Supplementary Rules.
   • If AAA is unavailable, parties must agree on another provider.
   • If a claim is deemed frivolous by either Smartwool or the arbitrator, the claimant must reimburse Smartwool for arbitration costs.
4. A re-worded line reading: "You and we agree to work together in an effort to resolve any dispute or claim between us relating to these Terms of Use, your account, purchases, or our products (“Dispute”)." This new line specifies 'purchases' and 'products', adding them under the dictation of forced arbitration.

See also

• Click-to-cancel
• Post-purchase EULA modification
• Disney wrongful-death lawsuit