A model that is strongly advocated in circular economy literature, is a shift from supply of products to rendering of services. Evidence in current literature has resulted in ample information regarding sustainable business models, but questions related to the impact, if any, on the users` rights and duties resulting from the implication of circular economy models, constitute a lacuna. This question mainly rises in the context of consumer protection. Despite the fact that the Consumer Rights Directive provides a general framework of consumer protection, The Consumer Sales Directive provides for an enhanced consumer protection in case of sales contracts. A services based business model could allow to circumvent said protection. Similarly the Consumer Credit Directive provides rules specifically targeting consumer credit. When the sales price is converted into a service fee, again the question arises whether an equivalent protection applies.
The main research questions posed in this context is:
- Is the current legal framework adequate to provide the same existing standard of consumer protection to users in contracts implied by the business models under a circular economy context?
- If not, how could consumer protection be re-designed to reach the current end goals?
The method used to answer this question is twofold:
First, through a literature study we investigate the equivalence of protection in case of services contracts by 1) investigating whether the substantive rules to the applicable instruments provide the same protection and 2) by assessing to what extent national courts and the CJEU have expanded Consumer Sales and Consumer Credit legislation to services contracts.
Second, through empirical studies of circular businesses` standard conditions we investigate to what extent such businesses deviate in practise from the level of protection provided in sales contracts. The study focuses on, on the one hand, the contractual approaches to the consumers’ after sales rights and obligations in case of damage, respectively his rights and obligations running the service contract and the applicable consumer law protection. On the other hand, the paper investigates the existence of safeguards against excessive compensation. This investigation will be based on general terms and conditions of existing companies in this field. For this purpose we performed two different case studies:
The first case study involves the automotive industry. This industry was selected because the services based model has been introduced years ago and has become mature in the recent years. This chapter investigates the equivalence of protection for four different types of business models:
- Traditional consumer sales;
- Long term private lease; and
- A sharing economy car co-ownership,with a further distinction between non-for profit and for profit sharing economy
The second case study is one of the bicycle industry. Three business models will be investigated in this study:
- Traditional consumer sales;
- Long term private lease; and
- Urban short term sharing bike platforms
Based on this research, policy recommendations will be made for a shift from a sales based to a services based consumer law. This is beneficial for both consumers and service providers.
9d. Law and sustainability
