Study Notes: Starting an E-Commerce Business in Austria

Case Study: The MaSwyS E-Commerce Venture

• Participants: Selma and Sebastian, both students in the Bachelor’s Programme in International Legal Studies at the University of Vienna.

• Inspiration: International peers such as Zhang Xu (China), Matteo (Italy), and John (UK).

• Business Goal: Starting an online shop focused on local communities, selling clothing (T-shirts) and accessories with the slogan ‘Make a Statement with your Stuff’ (MaSwyS).

• Legal Inquiries: Determining the requirements for registration, copyright, tax, data protection, and contract law within the Austrian and international framework.

Sources of Legal Requirements in Austria

• Austrian Domestic Law:     * Legislature: Policy decisions are made by the National Council (Nationalrat) in cooperation with the Federal Council (Bundesrat).     * Federal vs. State Law: While Austria is federal, business law is almost exclusively federal.     * Constitutional Law: Higher in rank than all other laws. Key instruments include the $1920$ Federal Constitutional Law (revised $1929$, B-VG), the $1867$ Basic Law on General Rights of Nationals, the $1947$ National Socialism Prohibition Act, the $1955$ State Treaty, and the European Convention on Human Rights (ECHR).     * Verordnungen: Administrative regulations issued by the administration to determine specific details of laws passed by parliament.     * Judicial Precedent: Case law is not a formal source of law beyond individual cases; lower courts are not strictly bound by the Supreme Court (OGH), though they usually follow it.

• European Union (EU) Law:     * Primary Law: Treaties like the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU), plus the Charter of Fundamental Rights (CFREU).     * Secondary Law: EU Regulations (directly take effect) and EU Directives (require national implementation).     * Primacy: EU law prevails over national law (Anwendungsvorrang).

• International Law:     * Sources: Customary law, general principles, and treaties (bilateral or multilateral).     * Ratification: A state is not bound by a treaty until the formal act of ratification. The Vienna Convention on the Law of Treaties (VCLT) governs these procedures.     * Key Organizations:         * Council of Europe (CoE): Focuses on human rights (interprets ECHR via the ECtHR).         * World Trade Organization (WTO): Regulates cross-border trade via GATT, GATS, and TRIPS. Includes the Most Favoured Nation (MFN) and National Treatment rules.         * United Nations (UN): Includes the International Court of Justice (ICJ) and specialized agencies like WIPO and UNCITRAL.

Starting a Business: Registration and Permission Requirements

• Trade Regulation Law (Gewerberecht):     * The Trade Act 1994 (GewO 1994): Applies to any economic activity that is self-employed, regular/continuous, and for-profit.     * Excluded Activities: Agriculture, forestry, arts, liberal professions (doctors, attorneys), and simple household activities.     * EU context: Traders in EU/EEA/Switzerland benefit from the ‘Four Freedoms’ (Goods, Capital, Services, Persons).     * Third-Country Context (e.g., China/UK): Subject to WTO rules. For the UK, the Trade and Cooperation Agreement (TCA) applies. Customs exemptions exist for goods with a value not exceeding $EUR 150$.

• Requirements for a Trade Licence (Gewerbebehörde):     * General Requirements: Full legal age, capacity, citizenship of EU/EEA (or specific residence permits), and no grounds for exclusion.     * Residence Permits (NAG): Selma (Bosnia) requires a student visa ($§ 64 NAG$). For employment, she is generally limited to 20 &text{hours/week}, but self-employed trading is permissible as long as studies are maintained.     * Exclusion Criteria ($§ 13 GewO$): Final convictions for specific crimes (fraud, drug crimes, financial offenses) resulting in more than 3 &text{months} imprisonment or a fine of more than 180 &text{daily rates}. Bankruptcy refusal for lack of assets also excludes a person from a license for 3 &text{years}.

• Regulated Trades ($§ 94 GewO$): Require specific certificates of qualification (e.g., master craftsman exams). Online shops (‘Handelsgewerbe’) are usually ‘free’ trades requiring only registration via the GISA system.

Company Law (Gesellschaftsrecht)

• Sole Proprietorship (Einzelunternehmen):     * Managed by one natural person; unlimited liability with private assets.     * Accounting threshold: Annual turnover > EUR 1,000,000 in one year or > EUR 700,000 in two consecutive years.

• Business Partnerships (Personengesellschaften):     * GesbR (Civil Law Partnership): No legal personality; partners have unlimited liability; each partner needs a trade license.     * OG (General Partnership): Legal personality; partners are personally and jointly liable; entry in the company register (Firmenbuch) is required.     * KG (Limited Partnership): At least one general partner (limited liability) and one general partner (unlimited liability).

• Corporations (Kapitalgesellschaften):     * GmbH (Private Limited Company): Legal entity; shareholders generally not liable. Share capital must be at least $EUR 10,000$ (half paid in cash).     * FlexCo (Flexible Company): New since $2024$; allows ‘company value shares’ for employees as small as 1 &text{cent}.     * AG (Public Limited Company): Minimum share capital of $EUR 70,000$; managed by a Management Board (Vorstand) and Supervisory Board (Aufsichtsrat).

Trade Name and Trademark Law

• Trade Name (Firma):     * Must be legible, pronounceable, and distinguishable (not descriptive like ‘Barber Shop’).     * Types: Name-based (Namensfirma), Purpose-based (Sachfirma), or Fancy (Phantasiefirma). Selma and Sebastian chose ‘MaSwyS’ OG.

• Trademark Law (Markenschutzgesetz, MSchG):     * Serves identifying and distinguishing functions. Types: Word mark, figurative mark, color mark, sound mark.     * Protection duration: 10 &text{years}, renewable indefinitely.     * International Protection: Madrid System (WIPO) for worldwide management or EU Trade Mark (EUIPO) for EU-wide effect.

Tax and Social Security Law

• Types of Taxes:     * Personal Income Tax (ESt): Progressive rates from $20 \%$ to $55 \%$. First $EUR 12,815$ are tax-free.     * Corporate Income Tax (KÖSt): Fixed at $25 \%$.     * Capital Gains Tax (KEst): $27.5 \%$ on profit distributions.     * Digital Tax: $5 \%$ for online ads by companies with global turnover > EUR 750 imes 10^6 and Austrian sales > EUR 25 imes 10^6.

• Value Added Tax (VAT):     * Standard rate in Austria is $20 \%$.     * Micro-enterprise exemption: No VAT if turnover < EUR 35,000.     * EU-One-Stop Shop (EU-OSS): Simplifies VAT for cross-border B2C sales; threshold for micro-enterprise local taxation is $EUR 10,000$.     * Import-OSS (IOSS): For third-country goods < EUR 150.

• Social Security (GSVG):     * Mandatory for trade license holders (WKÖ members). Covers health, pension, and accident insurance.     * Employees are covered under the General Social Insurance Act (ASVG).

• Labour Law: Austrian minimum wage is generally at least $EUR 1,500$ per month via collective bargaining.

Intellectual Property and Website Compliance

• Copyright Law (Urheberrecht):     * Protects intellectual achievements (literature, music, photos, code).     * Rights arise automatically without registration. Includes moral rights and economic exploitation rights.     * Free Use (Freie Werknutzungen): Private use, quotations, or educational purposes (subject to the ‘three-step-test’).

• Disclosure/Imprint Requirements:     * ECG/UGB/MedienG: Websites must disclose the trader's name, geographic address, email, VAT ID (UID), and business purpose (small/big disclosure).     * Price Indication Act (PrAG): Must show final prices including VAT and basic price per unit of measurement for bulk goods.     * Unsolicited Marketing: Prohibited unless specific consent is given or existing customers are contacted (opt-out register/ECG list).

• Non-Discrimination:     * Disability Equality Act (BGStG) requires barrier-free website access.     * Geo-blocking Regulation: Prohibits discriminating against customers based on residence or nationality (access, redirection, or payments).

Data Protection Law (GDPR)

• Personal Data: Any information relating to an identified or identifiable natural person.

• Legal Grounds (Article 6):     * Contract: For transactional data.     * Legitimate Interest: Fraud prevention, age verification.     * Consent: Must be freely given, specific, and informed. Tying/bundling is prohibited.

• Subject Rights: Access (Art 15), Portability (Art 20), Rectification (Art 16), and Erasure/Right to be Forgotten (Art 17).

• Technical Compliance:     * Privacy by Design/Default: Default settings must be the most data-conservative.     * Cookies: Functional cookies (session) are allowed; tracking/third-party cookies require explicit consent. ‘Dark patterns’ (manipulative designs) are controversial/prohibited.

• International Transfers: Rely on adequacy decisions (e.g., Canada, Japan) or Standard Contractual Clauses (SCC). The Schrems II decision invalidated the Privacy Shield for the U.S.

Online Contracting and Distance Sales

• Contract Formation: Based on Offer (Antrag) and Acceptance (Annahme).

• Distance Sales Law (FAGG):     * Right of Withdrawal: Consumer can withdraw within $14 \text{days}$ without reason. Extension of period by up to one year if information duties are not met.     * Order Button: Must clearly state ‘order with obligation to pay’ (or similar like ‘Buy now’).

• Warranty Law (VGG & ABGB):     * Warranty Period: $2 \text{years}$. Presumption period (that defect existed at delivery) is $1 \text{year}$.     * Remedies: Primary (repair or replacement); Secondary (price reduction or termination, excluding minor defects).

• Platform Regulation:     * Digital Services Act (DSA): Implements ‘notice-and-action’ for illegal content. Platform is not generally liable if it acts expeditiously upon knowledge.     * P2B Regulation: Ensures transparency for business users (e.g., ranking criteria, de-listing notice of $15 \text{days}$).     * Digital Markets Act (DMA): Targets ‘gatekeepers’ to prevent unfair practices ex ante.

Enforcement of the Law

• Public Enforcement: State-initiated (Criminal law/Tax law). Includes the ‘Advising instead of Punishing’ initiative for micro-enterprises.

• Private Enforcement: Individual lawsuits in civil courts (BG or LG). Follows the ‘loser-pays-principle’ for legal fees. § 19 ABGB prohibits self-help (Selbsthilfeverbot).

• Representative Action: Qualified entities (VKI, WKÖ) can sue for injunctive relief (Unterlassungsklage) to protect collective consumer interests (KSchG) or fair competition (UWG).

• Alternative Dispute Resolution (ADR/ODR): Internet Ombudsman or Conciliation Board. Traders must link to the European Commission’s ODR platform.