Reward-Based Crowdfunding and EU Consumer Rights

Abstract

Crowdfunding has become a popular and mainstream way of financing projects and businesses, ranging from community projects and charities to small and mediumsized enterprises (SMEs), creative projects and high potential start-ups. Of the four types of crowdfunding that can be distinguished, this article focuses on reward-based crowdfunding. It will be argued that contracts concluded under a reward-based crowdfunding project within the EU will generally fall within the scope of several EU consumer rights regulations, including the Consumer Rights Directive. This article will focus on the contractual rights and obligations under this directive. As a reward-based crowdfunding project, apart from some exceptions, will have to comply with this directive, the crowdfunding platform and/or the crowdfunding initiator will have to comply with information and delivery requirements, of which especially the delivery requirement do not fit the nature of reward-based crowdfunding. Non-compliance may lead to consumers having the right to terminate, which may compromise the crowdfunding project, as it depends on the participation of the crowd. Possibly the biggest threat to reward-based crowdfunding is the right of withdrawal. Where the withdrawal period for services contract ends 14 days after the conclusion of the contract, with sales contract this period only ends 14 days after the delivery of the goods. The article argues for tailor made exemptions in the Consumer Rights Directive in order to avoid that exercising the right to withdrawal by one or more consumers leads to the collusion of the crowdfunding project.