The European Commission has referred EU member state Hungary to the bloc’s top court over the limits the country has put on margins in the retail sector.
In June last year, Brussels started “infringement procedures” against Hungary over the caps the country’s government placed on margins.
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Three months earlier, Hungary put restrictions on 30 food items, capping retailers’ margins at 10%. Then Prime Minister Viktor Orbán said at the time he was seeking to halt “unjustified price increases”.
In December, the Commission gave Budapest two months to “take the necessary measures” on the measures or face the case being taken to the Court of Justice of the European Union (CJEU).
Today, Brussels said it was referring Hungary to the court, arguing the margin caps “are liable to impose discriminatory and disproportionate requirements” and breach EU rules that allow companies to set up business in another member state.
According to the Commission, the “restrictions” Hungary has placed on margins “mainly affect non-Hungarian undertakings”.
Just Food has approached the Hungarian government for comment.
Brussels says Budapest had extended the measures announced in March last year “several times” before making them a permanent law in May.
It argues the Hungarian government has set the caps “to such a low level” that retailers are selling the products at a loss.
Brussels said it is asking the CJEU to examine caps concerning the sale of food products by grocers and another covering similar restrictions for the sale of non-food products by drug stores.
“Retail trade incurs many costs beyond the costs of purchasing products, including employee-related expenses and costs of transport, storage and facilities, amounting to an average price margin of 30% for food retail and 35% for drugstore retail, while profit margins are much lower, around 3-4%,” the Commission said in today’s statement.
“The combined effect of fixing maximum price margins and requiring retailers to sell the same quantities of the concerned products creates losses for existing operators already in the market and removes any incentive for new operators willing to start such economic activities to establish themselves in Hungary.”
The Commission added: “Hungary wrongly claims that the difference between the sourcing price and the sales price equals the profit of the companies concerned, without taking into consideration that they also have substantial additional costs, such as for personnel, real estate and taxes.”
In April, Brussels referred Hungary to the CJEU over another measure introduced under the former Orbán administration.
The Commission argued a tax Budapest introduced in 2022 discriminates against non-Hungarian retailers.
