The EU has initiated “infringement procedures” against Hungary over its mandatory caps on the profit margins of various food and non-food products.
In a notice dated 18 June, the European Commission (EC) said it had sent “two letters of formal notice” to the Hungarian government over price-margin limits imposed on non-Hungarian food suppliers. The first concerns food retailers and the other drugstores selling non-food items.
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”.
Orbán 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.”
The EC said this week the margin caps are putting pressure on non-native retailers’ profits.
“Hungary limits the margin between purchase prices and sales prices of certain products to a level that no longer covers the costs of foreign companies beyond their costs for purchasing products, forcing non-Hungarian retailers to sell their products at a loss,” the executive arm of the EU bloc said in its circular.
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By GlobalDataThe EC argued that Hungary’s price caps breach the “freedom of establishment” under Article 49 of the TFEU (Treaty on the Functioning of the European Union).
According to the Commission, that treaty obliges “public authorities to ensure the equal treatment and non-discrimination of economic operators and to refrain from restricting economic activities unless such restrictions are justified to attain certain public interest considerations”.
Hungarian authorities have been given two months by the EC to respond and address the issues raised in the letters of formal notice.
“In the absence of a satisfactory response, the Commission may decide to issue reasoned opinions,” it added.
A reaction has been forthcoming from the Hungarian government.
Gergely Gulyás, the minister in charge of the Prime Minister’s Office, said in a statement posted on the government website: “Hungary is resisting this pressure, maintaining and defending these measures.”
Gulyás added: “These decisions show that Brussels’ support for Ukraine and the profits of multinationals are important”, but the Hungarian government “must represent the interests of the people living here and pay attention to the operational aspects of the businesses working here”.
As well as margin caps, Hungary has also taken other measures to protect consumers from rising costs.
Last year, the government required major food retailers to label products affected by “shrinkflation”.
Retailers with annual sales exceeding Ft1bn ($2.8m today) were mandated to display notices on items that had decreased in size without a corresponding price drop, or a price increase.
The labelling had to remain in place for two months from when the smaller-sized product first went on sale.
