The European Commission has urged Hungary to withdraw mandatory limits on profit margins applied to a wide range of food and non-food goods.
In a statement issued on 11 December, the Commission said it had sent two “reasoned opinions” to Budapest over measures that cap the margins retailers can apply to certain products.
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The EU executive arm said the rules apply across the board to foreign-owned businesses, while affecting only a segment of domestic firms.
One of the procedures targets legislation covering specific food items sold by grocery retailers, while the second addresses comparable rules imposed on selected non-food goods sold by drugstores, the Commission said.
Hungary implemented profit-margin restrictions on 30 food items from mid-March, capping retailers’ margins at 10%.
Prime Minister Viktor Orbán said at the time he was seeking to halt “unjustified price increases”.
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By GlobalDataOrbán explained: “In order to curb unjustified and excessive price increases, we have been negotiating with representatives of retail chains in recent days. Unfortunately, the offers of retailers fell far short of our expectations, so we had to decide to introduce measures for trade.”
Responding to the Commission’s orders, the Hungarian government said the move “once again demonstrates that Brussels continues to side with multi-national corporations rather than European consumers”.
Since the measures were introduced, food prices have fallen by an average of 20-24%, while prices of drugstore products had dropped by more the 27%, the government claimed in a statement.
Given the results, the margin caps have been extended to 28 February, while the scope of products falling within the restrictions has been widened to include 13 additional categories, it added, without identifying the concerned new items.
“The Hungarian government is prepared to defend the margin cap against the ongoing procedure launched by the European Commission as safeguarding affordable prices and protecting families remains a priority,” the statement read.
The Commission’s latest move marks the next stage in infringement proceedings that were opened in June.
A “reasoned opinion” is a formal notice calling on a member state to align its regulations with EU law.
Under EU internal market rules, public authorities “must refrain from restricting economic activities unless such restrictions are justified to achieve certain public interest objectives”.
According to the Commission, “Hungary limited the margin between purchase prices and sales prices of products to such a low level that it no longer allows businesses to cover their costs, forcing non-Hungarian retailers to sell their products at a loss”.
The Commission said the Hungarian authorities treat the gap between procurement and retail prices as equivalent to profit, “not taking into consideration that undertakings also have substantial additional costs, for instance for personnel, real estate and taxes”.
It added that the measures risk undermining employment at the affected chains.
Hungary has been given two months to reply and to adjust its national rules.
If the response is deemed unsatisfactory, the Commission can escalate the matter by bringing the cases before the Court of Justice of the European Union.
