Government flaw led to near-bankruptcy of upstart company
When Fritz Unger, creator of the Hanover startup Skywind, received an email on January 31, he felt moderately baffled. There was a complaint against his company from the Austrian Federal Office of Metrology and Surveying (BEV). His company was no longer allowed to sell their micro-wind turbines - small wind turbines that homeowners can install on their rooftops to generate sustainable electricity - and had to initiate a recall of the already sold units, the email declared. And all this was effective immediately, across the EU. "We didn't even know why," said Unger. Worse yet, an independent testing institute had certified the startup's turbines at the end of 2024.
Three months later, in April, the situation was cleared: The BEV's decision was "unlawful." This was the ruling of the Austrian Federal Administrative Court. The Skywind turbines were deemed "safe." There was "no reason for a recall or a warning obligation," the decision stated. The testing procedure should be "fully discontinued."
However, by then, Skywind had already incurred over one million euros in lost sales, according to CEO Unger. The distribution was on hold for three months, and many units had to be recalled – even though it later turned out they were perfectly fine. The long-term effects would linger, Unger lamented.
But how could it have come to this, one might wonder? And how did an Austrian authority seemingly bring a company from Hanover to a halt?
The origin of Skywind's predicament stems from the so-called Market Surveillance Regulation (MSR). It's a European Union law enacted in 2021 and potentially affects every company in Europe, especially manufacturers and traders. The purpose of the MSR is to ensure that all products compliance with European safety and quality standards within the European internal market, both in stationary and online retail. This is to safeguard health, consumer protection, and the environment, promote fair competition, and strengthen consumer confidence. That's the gist of it.
Practically, the law is enforced by various authorities in the EU member states, depending on who is responsible for market surveillance in each location. The respective authority investigates tips and can publish a Safety Gate notification on the website of the European Commission, alerting consumers to potential risks of a product. In most cases, the affected company then has time to react before further measures, like a sales stop, are taken.
In Skywind's case, things unfolded differently. The Austrian Federal Office of Metrology and Surveying issued an immediate sales ban, justifying it with a "serious risk" posed by the product. In the Safety Gate notification, it was stated the product would cause electric shocks.
The basis for these claims was a report commissioned by the BEV. In 2024, the BEV conducted a test purchase of the Skywind installation and sent the product to an expert. Later, the Austrian Administrative Court ruled that the report was flawed. Unger suspects that the BEV sent a plagiarized report, not a Skywind installation, to the expert. He later discovered that the dimensions of the installation did not match those of the Skywind installations, he shared with Gründerszene.
Unger and his team didn't find out about this until late January 2025. He only saw the report during the court proceedings. He criticized: "If we had been contacted earlier, we could have cleared things up much sooner." The report was ready by the end of December 2024. It took a whole month until the Safety Gate notification.
The matter became even more complicated, as the company was forced to engage a law firm and file a complaint with the Austrian authority. Normally, this authority is required to first examine some formalities of the complaint and then pass it on to a court. However, nothing happened in the case of Skywind. It wasn't until after five weeks of repeated inquiries by Skywind's lawyers that the documents reached the court, according to Unger.
Why the BEV did not act remains unclear. The authority failed to respond to a comprehensive list of questions from Gründerszene or a request for a statement.
Could This Happen to Anyone?
What remains for Unger is the feeling of having been more or less arbitrarily incapacitated by an authority – all thanks to an EU law.
The Skywind case "stands out," observes Kuuya Chibanguza, a lawyer and partner at Kanzler Luther in Hannover. Alongside his colleagues Benedikt Stücker and Kay Oelschlägel, he represented Skywind during the proceedings. The law firm often works with the market surveillance law, they shared in a conversation with Gründerszene. While generally beneficial, legal protection can be difficult.
Because companies only have the right to defend themselves against Safety Gate notifications in the country where they were issued. In Skywind's case, Unger also had to hire a second law firm in Austria, and the proceedings took place in Austria. "And I was lucky," says Fritz Unger. "At least they speak German in Austria. How would it have been, for example, in Hungary?"
Procedure Complicated – and Expensive
The situation is further complicated by the fact that procedures around the market surveillance law are not uniform across EU countries. In some member states, there isn't even a legal means for challenging Safety Gate notifications, leaving companies without a clear path for legal recourse.
Skywind, for example, faced legal fees in the six-figure range by the end, according to Unger.
Frequently, clients initially don't take investigations abroad seriously, especially if they come from a country that represents only a niche market, Chibanguza lamented. Many only consult a lawyer after a Safety Gate notification has been published. This delay often costs clients a lot of money.
- What if a turbine manufacturer, who had just recently unveiled a new product line of micro-wind turbines, received an abrupt cease and desist order from an authority without any clear reason?
- In the wake of such a decree, what would happen if the company had to recall its already distributed products and incur heavy financial losses due to halted sales?
- Imagine a situation where an independent testing institute had granted certification to the matter, but the authority's decision remains unlawful, later deemed as such by a court of law.
- In such a scenario, how would it feel for a CEO to discover that an authoritative body had brought his company to a grinding halt, all based on a flawed report and questionable procedures?
- Some may wonder, how could this happen on a broader scale within the European Union, as a result of policy-and-legislation enacted to safeguard health, consumer protection, and the environment?
- Could small businesses, operating in diverse industries such as technology, finance, or general-news, find themselves in a similar predicament when faced with the complexities of the Market Surveillance Regulation, enforced by various authorities across different EU member states?
