Forced arbitration with Smartwool socks

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Smartwool is a brand of wool clothing. The incident described in this summary is a example of post-purchase EULA (End User License Agreement) modification (colloquially referred to as "EULA roofieing"). It occurs when a business attempts to create or modify a contract after a sale on the basis of no-response from customers. Often this is done as prudence for business interests. However, EULAs create the potential for unjust situations. 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.

A feature of this example is 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.

Incident of post-purchase EULA modification

According to a viewer of the Rossman channel, 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 must send a letter through USPS Priority Mail, which 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, preying on an individual's reasoning that the effort involved in attempting to opt-out is not worth the time or money.

Text from the EULA as it appeared.

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.

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.
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.