Overview of e-commerce in Switzerland

FROM THE ECONOMIST INTELLIGENCE UNIT

Two out of three Swiss families (about 73%) owned a computer, and more than half (58%) had access to the Internet in their homes in 2005, according to a survey by NetBase, a Basle-based Internet research project of MMXI-Switzerland. More than 1m consumers had broadband access, compared with 850,000 at end-2003. ADSL (asymmetric digital subscriber line) technology registered the biggest gains, with 63% of the broadband market. Internet access via cable television and radio network accounts for most of the rest.

As a result of this highly developed infrastructure, Switzerland has the necessary ingredients for the growth of e-commerce. Although initially lacklustre, online retail transactions are growing. Migros’s LeShop online supermarket, for example, had 25,300 customers buying Swfr47.11m worth of products in 2005, up by 45% on 2004. Its sales are expected to swell to Swfr470m by 2011. Its principal competitor, Coop, which went online in November 2004, is registering a similar increase in sales. Still, only a small percentage of the Swiss population has embraced electronic shopping. A survey published in 2005 by Remp, a media research and study group, revealed that only 16% of Swiss Internet users shopped online compared with, for example, France, where this proportion rose to 50% of its 13m Internet users.

In December 2005, 2.03m people visited an e-commerce site at least once, a rise of 24.5% since 2003, according to the Nielsen/NetRatings. Swiss customers averaged one hour and 49 minutes online, or 37% more than in December 2004. E-Bay had the most hits, with 921,000 visitors, or 25.8% of Swiss users. The most frequently visited sites were the online supermarkets Migros (up by 80.6%) and Coop (up by 50.4%). Purchases from mail-order fashion companies such as Jelmoli, Heine and Ackermann also are growing spectacularly. Switzerland’s leading bookstore Payot launched its online shopping site in February 2005, with expectations of capturing 20% of the online book market in the French-speaking Swiss region in 5–7 years.

Business-to-business (B2B) e-commerce is picking up, especially in specific sectors, where companies are increasingly using electronic data interchange for order processing and fulfilment, invoicing and payments. One successful firm is Ciba Specialty Chemicals, which has a comprehensive e-commerce website—mybusiness@cibasc. It allows clients to place orders, track their progress and obtain certificates of analysis and safety data. It also provides system-to-system linkage with 50 major customers and suppliers. Another Swiss pioneer is Bernina, which manufactures sewing machines, and sells its products and spare parts to its retailers via the SAP Online Store.

In February 2005 Swisscom IT Services became Switzerland’s first Google partner for business customers in a non-exclusive accord that includes Swisscom offering the Google Enterprise Search Appliance to access non-confidential corporate documents.

Business-to-consumer (B2C) e-commerce has shown the greatest progress in recent years, in the growth of both online companies and customers. In the financial sector, the big Swiss banks (UBS and Credit Suisse) moved early to provide Internet-based services, and they have a far-reaching online presence. Other banks are now following suit. The state-owned Post Office is becoming more active online, having acquired an important search engine (http://www.search.ch) in July 2004 in order to provide better service for its more than 300,000 clients.

Online trading is also catching on. Swissquote, which has taken over several online-brokerage systems in recent years, increased its management portfolio to Swfr3.7bn and the number of its customers to 56,813 by July 2006. At www.bcvgroup.ch, the Banque Cantonale Vaudoise, which started in September 2004, now has 5,850 client subscribers. Tradejet, based in Zurich, began operating in early 2005 and expects to have 5,000 clients by 2007. And at end-March 2006 the Banque Cantonale Bernoise’s trade.net site saw its client roster rise by 13.1%, to 18,000 persons, on the previous year.

Online employment agencies report continuous growth in job offers and clients. Publicitas, a Swiss advertising and publicity company, created new offices in Geneva and Zurich in June 2005 to handle only online advertisements for jobs, real property and cars on its publiconnect.ch site.

Swiss travellers are increasingly booking their plane, train and hotel reservations on the Internet; indeed, EasyJet, a popular no-frills airline, accepts only online bookings. The national railway system (CFF) allows customers to print their own tickets at home.

Although Swiss consumers have been sceptical about communicating electronically and wary about sharing their personal data, electronic banking is gradually growing. PayNet (a subsidiary of Telekurs, a Swiss financial information group) allows bank clients to access their bills and make direct payments without any supplementary charge on the bank website. In June 2006 Post Finance and Swisscom IT Services interconnected their trading platforms, Yellowbill and Conextrade, to facilitate the exchange of electronic VAT-compliant invoices over two separate systems. Further, Swisscom Fixnet and Datatrans are integrating Click&Buy as a payment solution via the telephone bill. Datatrans specialises in e-commerce payment transactions involving credit cards. Click&Buy handles the billing for online purchases up to some Swfr3,000 for such companies as the Spruengli Confectionary Shop, ExLibris Music Download, iTunes and NZZ Online.

To build public trust, e-Bay’s Swiss headquarters in Bern is co-operating with the Migros School in offering workshops on buying and selling online. And Swisscom (the national telecom company) and the State Secretariat for Economic Affairs have set up some100 “Help Points” sites that offer courses on how to reap the benefits of information technology.

The Economist Intelligence Unit ranked Switzerland third out of 65 countries in its 2006 “e-readiness” survey, and the World Economic Forum rated it ninth of 104 countries for its use of information technology. Yet it is ranked 20th out of 28 European countries in electronic government, according to a 2004 study by Capgemini for the European Commission. Some cantons, like Neuchâtel, have made spectacular advances, whereas others have not been able to put together a website. A major deterrent has been the incompatibility of the databases of the cantons and communes, and their subsequent inability to link up with the federal authorities’ computer infrastructure.

The government renovated its multi-language site (www.ch.ch) providing information on the federal, cantonal and local authorities and in May 2006 launched www.pme.admin.ch to help small and medium-sized companies start up.

Fourteen communes in the canton of Geneva and 15 in Zurich now allow citizens to vote via the Internet.

E-commerce: Growth of e-commerce

In 2005, 66% of the Swiss population aged over 15 surfed the Internet from home—73% of men and 59% of women—according to a survey by NetBase, an Internet research project of MMXI-Switzerland. On the business side, most Swiss companies now have computers, maintain access to the Internet and have created their own websites.

Both the Swiss electric grid and telephone systems are of superior quality. Swisscom has extended its ADSL (asymmetric digital subscriber line) network to cover 98% of the national territory. Swisscom is installing high-speed downlink packet access (HSDPA). In March 2006 it tripled ADSL speed to 2 M/bts for the same monthly price of Swfr49, and to 5 M/bts for Swfr99.

There are 30 major Internet service providers (ISPs) in Switzerland. These include Bluewin, Iprolink, Infomaniak and AOL Switzerland. There are some smaller free services as well.

E-commerce: Foreign investment

Switzerland has few restrictions on foreign investment that would affect e-commerce. When the state-owned telephone business was opened to private investors, however, companies have had to apply for licences. Otherwise, there are no special barriers to foreign companies creating or investing in e-commerce ventures.

E-commerce: Intellectual property

Swiss rules governing intellectual property (both copyright and trademarks) are the same for online as for offline businesses. Protection is high in Switzerland. For example, a company using an Internet service provider (ISP) or an independent designer to set up its website is advised to have a contract that states that the page is its own property and that it can make minor changes or updates. Otherwise, the designer holds the copyright.

In March 2006 Switzerland ratified World Intellectual Property Organisation (WIPO) Copyright Treaty (WCT) and Performance and Phonograms Treaty (WPPT) that prevents unauthorised copying or use of creative works on the Internet and insures payment of royalties. Accordingly, the Federal Council sent a partial revision to the copyright act to parliament.

Apple (US) and Sony (Japan) are now battling for control of the Swiss market for downloading music via the Internet for a charge, thus making the downloading legal. They now join the market shared by City Disc, Microsoft and Exlibris.

Companies questioning or disputing a domain name can call on the Switch Foundation at the Swiss Education and Research Network (http://www.switch.ch). The Switch dispute-resolution service was introduced on March 1st 2004, simultaneously with the launch of domain names containing accents and umlauts. To ensure that a domain name is not infringing the rights of a third party, Switch provides links to registered names and signs. Switch does not actively intervene in disputes; rather, it helps to settle them with the domain-name holder and the third party claiming a right to the domain name. Litigation concerning domain names is settled through civil action or dispute-resolution proceedings. The first step is to address the Arbitration and Mediation Centre at the WIPO in Geneva. From January 1999 to December 2005, WIPO dealt with 294 disputes filed by companies and personalities in Switzerland.

A recent case of fraudulent use of a domain name concerned a site based in China (http://www.swisscreditbank.com) that claimed headquarters in Zurich and offered banking services without a licence. When the Hong Kong Monetary Authority (HKMA) and a US federal agency sounded the alarm, the Swiss Federal Banking Commission closed the site’s fax number registered with Swisscom, the only action it could take since it has no control over fraudulent Internet sites. Other than informing the banking commission and filing a complaint with WIPO, the Credit Suisse Group could do little since the fraudulent party did not reside in Switzerland. In fact, the name “Suisse”, even in English, is not protected. Since anyone can use this label, WIPO cannot force the closure of the site unless the domain name creates confusion with another mark. HKMA’s worldwide public alert and referral to the Hong Kong Police Force have apparently worked, since the fake site has since disappeared.

After six years of haggling, the Swiss government will finally reclaim the “Swiss.ch” Internet address in its three national languages on December 1st 2006. A businessman selling mainly tee shirts registered www.schweiz.ch, www.suisse.ch and www.svizzera.ch in 1995 and in June 2006 appealed against WIPO’s decision to grant the Swiss government the exclusive right to use the domain site, because of his high investments in the sites.

Online database setups for large customers and suppliers require encryption systems to ensure that data remain protected. Otherwise, consultants warn, competitors or malicious wrongdoers could set up dummy companies to initiate orders and foul up or even bankrupt the e-business.

E-commerce: Consumer protection

Privacy is protected by law in Switzerland. The government is deliberating a revision to the Federal Act on Data Protection of June 19th 1992 (LPD, RS235.1) that aims to increase transparency; guarantee protection of access, use and transfer of personal data; and give persons the right to delete information about themselves, particularly their medical and political history. The government is also considering rules governing unsolicited e-mail advertising (spam) in a revised law on telecommunications. It would ban mass mailing by amending the law against unfair competition.

After consulting with industry, the government has proposed a law to protect e-commerce consumers. As with offline retail contracts, a consumer would have seven days to revoke a sale. If the goods are defective, the purchaser could ask for annulment of the sale, payment for the mistake or defect, or repair of the product. This would enforce, for online sales, the protection already provided for offline sales under the Civil Code. A National Council Commission began deliberating this proposed law in June 2006.

There are two associations that provide labels guaranteeing quality of products sold on the Internet. Since 2001 the French-speaking consumer-protection association (Fédération romande des consommateurs—www.frc.ch) grants Web Trader codes, thus joining consumer-protection associations in nine other European countries, including the UK. Based on a code of practice, this labelling system aims at developing e-commerce by attesting to the reliability of web sites displaying the Web Trader logo. And in November 2000 the German-speaking consumer-protection group Konsumentenforum joined with economiesuisse (the Swiss employers association), the Swiss Association for National Standards, and the Swiss Association for Information Technology and Communications to launch e-com trust (http://www.e-comtrust.org). Both organisations have established principles that firms must respect to gain certification and the right to use the logos. After the certification stage, the associations conduct regular verifying rounds and provide an office of conciliation or ombudsman to settle problems. Web-Trader logos and e-com trust labels are available.

Consumers remain cautious about giving credit-card information over the Internet. To win their confidence, credit-card companies are launching more-secure payment systems. The companies issuing Visa, MasterCard and other credit cards (Viseca and Corner Bank) have introduced Secure Electronic Transaction (SET) systems. These require a password known only by the titleholder and allow the identification of the online seller. However, their systems are less consumer friendly than classic sales contracts: the cardholder—not the commercial enterprise or the bank—assumes the risk of fraudulent transactions.

E-commerce: Contract law and dispute resolution

Swiss contract law is based on the principal of freedom of contract and of form, as established in the Code of Obligations (Article 11). For example, if a supplier offers components via the Internet and a purchaser places an order, there is in effect a contract—as long as the seller acknowledges the acceptance of the order. Further assurance is possible if the contracting parties use digital or encrypted signatures. Most companies use private third parties to certify electronic contracts and signatures. Firms have security keys and need not worry about repudiation of such contracts if they use service companies such as VeriSign or Wisekey (World Internet Security Key).

An ordinance of the Federal Office of Communications of April 2000 sets out the technical and administrative stipulations for electronic certificates and signatures. The Federal Law on Certification Services in the Field of Electronic Signatures, which came into force on January 1st 2005, enforces the recognition of digital signatures as equivalent to handwritten signatures. Under its provisions, only notarial acts governing property and wills still require signatures on paper. KPMG, an accountancy, has been appointed to authorise bodies, based on reliability of their security systems, to certify and thus legalise a digital signature. The service charge has initially been set at Swfr100 a year. Firms authorised to issue electronic certificates include Swisscom (a telecommunications giant), OFAC (a pharmacists’ co-operative) and SwissSign (a digital-encryption specialist). In fact, SwissSign was bought in August 2005 by the Swiss Post, which allows its customers to send registered letters by e-mail.

There have been few disputes so far, and no published examples of dispute resolution. However, the Bern authorities in October 2002 suspended a suit against a hacker who had pirated data from the information system of the World Economic Forum meeting at Davos in January 2001. The judges decided that the forum organisation had not sufficiently protected its sensitive data.

E-commerce: Basis of taxation

Switzerland treats online and offline transactions equally, and firms making interactive sales are subject to both direct federal and cantonal income taxes on their profits. Depending on the type of transaction, data transferred could be classified as a service (for example, software development), as a delivery of goods (a downloaded CD) or as a licensing of a copyright (leasing a programme for a specific period). Profits from such electronic transactions are taxed as ordinary income. There is no Swiss withholding tax on royalties paid abroad.

In addition, all of the above types of transactions are subject to value-added tax (VAT), now imposed at a basic rate of 7.6%. But there is no VAT on services unless they total more than Swfr10,000 per year.

Electronic invoicing is governed by a March 1st 2002 ordinance. There must be a complete audit trail so that every business process can be followed from beginning to end. Each participant must keep a chronological transaction logbook in which all EDI (electronic data interchange) messages are fully recorded. All records should then be presented in such a way as to be easily reproduced in a comprehensible, complete and unchanged form. An electronic signature must provide verification of origin, integrity and indisputability of dispatch and receipt of the EDI message. In addition, a certification service provider, TC Trust Centre of Germany, has been appointed to guarantee VAT encryption.

E-commerce: Classification of e-commerce transactions

E-commerce transactions are treated like offline transactions. There are no differences in classification.

E-commerce: Compliance and enforcement issues

E-commerce is still so new that Switzerland has not established any specialised systems for compliance or enforcement. Once groups such as the European Union and the Organisation for Economic Co-operation and Development set standards, the Swiss will probably establish compatible rules.

E-commerce: Key contacts

• Business Location Switzerland, State Secretariat for Economic Affairs, Effingerstrasse 31–35, CH-3003 Bern; Tel: (41.31) 323 07 10; Fax (41.31) 324 86 00; Internet: http://www.LocationSwitzerland.ch.
• Committee for Technology and Innovation (CTI), Effingerstrasse 27, CH-3003 Bern; Tel: (41.31) 322 21 43; Fax: (41.31) 322 21 15; Internet: http://www.bbt.admin.ch/kti/aufgaben/e/index.htm.
• Economiesuisse, Swiss Business Federation, Hegibachstrasse 47, CH-8032 Zurich; Tel: (41.44) 421 35 35; Fax: (41.1) 421 34 34; Internet: http://www.economiesuisse.ch/d/webexplorer.cfm?id=351&tlid=1.
• European Patent Office (EPO), Erhardtstrasse 27, 80331 Munich, Germany; Tel: (49.89) 23 99 0; Fax: (49.89) 23 99-4465; Internet: http://www.european-patent-office.org.
• Export Risk Guarantee Agency (ERG), Kirchenweg 8, CH-8032 Zurich; Tel: (41.44) 384 47 77; Fax: (41.44) 384 47 87; Internet: http://www.swiss-erg.com.
• Federal Banking Commission (FBC), Schwanengasse 12, CH-3001 Bern; Tel: (41.31) 322 69 11; Fax: (41.31) 322 69 26; Internet: http://www.ebk.admin.ch/e/.
• Federal Office for Environment, Papiermuehlestrasse 172, CH-3063 Ittigen; Tel: (41.31) 322 93 11; Fax: (41.31) 322 79 58; Internet: http://www.umwelt-schweiz.ch/buwal/eng/.
• Federal Office of Communications (OFCOM), Zukunftstrasse 44, CH-2501 Biel; Tel: (41.32) 327 55 11; (41.32) 327 55 55; Internet: http://www.ofcom.admin.ch/index.html?lang=en.
• Federal Office of Private Insurance, Friedheimweg 14, CH-3003 Bern; Tel: (41.31) 322 79 11; Fax: (41.31) 323 71 56; Internet: http://www.bpv.admin.ch/index.html?lang=en.
• Federal Competition Commission (FCC), Montbijoustrasse 43, CH-3003 Bern; Tel: (41.31) 322 20 40; Fax: (41.31) 322 20 53; Internet: http://www.weko.admin.ch.
• Federal Department of Economic Affairs, Parliament Building East, CH-3003 Bern; Tel: (41.31) 322 20 07; Fax: (41.31) 322 21 94; Internet: http://www.evd.admin.ch/evd/index.html?lang=en.
• Federal Tax Administration, Eigerstrasse 65, CH-3003 Bern; Tel: (41.31) 322 71 06; Fax: (41.31) 322 73 49; Internet: http://www.estv.admin.ch/data/e/index.htm.
• Institute of Intellectual Property (IIP), Einsteinstrasse 2, CH-3003 Bern; Tel: (41.31) 325 25 25; Fax: (41.31) 325 25 26; Internet: http://www.ige.ch/defaulte.htm.
• Money-Laundering Control Authority, Christoffelgasse 5, CH-3003 Bern; Tel: (41.31) 323 39 94; Fax: (41.31) 323 52 61; Internet: http://www.gwg.admin.ch/e/index.htm.
• Office of Fiscal Information, Federal Tax Administration, Eigerstrasse 65, CH-3003 Bern; Tel: (41.31) 322 71 48; Fax: (41.31) 322 73 49; Internet: http://www.estv.admin.ch/data/ist/e/vorzug.htm.
• Price Surveillance Office, Effingerstrasse 27, CH-3003 Bern; Tel: (41.31) 322 21 01; Fax: (41.31) 322 21 08; Internet: http://www.preisueberwacher.admin.ch (French, German and Italian only).
• State Secretariat for Economic Affairs (SECO), Effingerstrasse 1, CH-3003 Bern; Tel: (41.31) 322 56 56; Fax: (41.31) 322 27 49; Internet: http://www.seco-admin.ch.
• Swiss Employers’ Federation, Hegibachstrasse 47, CH-8032 Zurich; Tel: (41.44) 421 17 17; Fax: (41.44) 421 17 18; Internet: http://www.arbeitgeber.ch (French and German only).
• Swiss National Bank (SNB), Börsenstrasse 15, CH-8022 Zurich; Tel: (41.44) 631 31 11; Fax: (41.44) 631 39 11; Internet: http://www.snb.ch/e/index3.html.
• Swiss Takeover Board (COPA), Selnaustrasse 30, CH-8021 Zurich; Tel: (41.58) 854 22 90; Fax: (41.58) 854 22 91; Internet: http://www.copa.ch/intro_en.html.

Important cantonal contacts for incentives are as follows:

• Bern: Denis Grisel, Bern Economic Development Agency, Muensterplatz 3, CH-3011 Bern; Tel: (41.31) 633 41 20; Fax: (41.31) 633 40 88; Internet: http://www.berneinvest.com.
• Fribourg: Thierry Mauron, Fribourg Development Agency, Avenue de Beauregard 1, CH-1700 Fribourg; Tel: (41.26) 425 87 00; Fax: (41.26) 425 87 01; Internet: http://www.promfr.ch.
• Greater Zurich Area: Willi Meier, Regional Economic Development Office, Limmatquai 112, CH-8001 Zurich; Tel: (41.44) 254 5959; Fax: (41.44) 254 59 54; Internet: http://www.greaterzuricharea.ch.
• Neuchâtel: Gérard Lopez, Economic Development, Collegiale 3, CH2001 Neuchâtel; Tel: (41.32) 889 68 23; Fax: (41.32) 889 62 95; Internet: http://www.ne.ch/promeco.
• St Gallen: Beat Ulrich, Business Development Agency, Davidstrasse 35, CH-9001 St Gallen; Tel: (41.71) 229 48 93; Fax: (41.71) 229 39 92; Internet: http://www.location.sg.ch.
• Ticino: Charles V. Barras, Economic Promotion, Viale S. Franscini 17, CH-6501 Bellinzona; Tel: (41.91) 814 35 41; Fax: (41.91) 814 44 57; Internet: http://www.copernico.ch (Italian only).
• Vaud and Western Switzerland: Jacques Pasche, Development Economic Western Switzerland (DEWS), 2 avenue de Gratta-Paille, CH-1000 Lausanne 30; Tel: (41.21) 641 17 17; Fax: (41.21) 641 17 18; Internet: http://www.dews.com/index.php?lg=en.

SOURCE: COUNTRY COMMERCE