The European Commission has urged Hungary to retract mandatory profit margin limits that apply to a broad spectrum of both food and non-food items.
On December 11, the Commission issued a statement indicating that it had sent two “reasoned opinions” to Budapest regarding these measures, which restrict the margins retailers are allowed to impose on certain products. Notably, these regulations impact foreign-owned businesses uniformly while disproportionately affecting specific domestic firms.
The Commission explained that one of the procedures targets legislation covering specified food items sold by grocery retailers, while the other addresses similar restrictions on certain non-food items sold through drugstores. Since mid-March, Hungary has implemented profit-margin limits on 30 food items, capping retailer margins at 10%.
Prime Minister Viktor Orbán emphasized his intent to curtail “unjustified price increases,” stating, “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.”
In response to the Commission’s demands, the Hungarian government remarked that this action “once again demonstrates that Brussels continues to side with multi-national corporations rather than European consumers.” Despite the controversy, the government asserted that food prices have decreased by an average of 20-24% since the measures were enacted, with drugstore prices falling by over 27%.
Given these outcomes, the margin caps have been extended until February 28, with the list of affected products expanded to include 13 additional categories, although specifics of these items were not disclosed. The Hungarian government expressed its commitment to defend the margin cap amid ongoing proceedings from the European Commission, highlighting that maintaining affordable prices and protecting families remains a priority.
The Commission’s latest actions represent an escalation in the infringement proceedings initiated in June. A “reasoned opinion” serves as a formal request for a member state to align its regulations with EU law. Under the EU’s internal market regulations, public authorities must avoid restricting economic activities unless justified by specific public interest objectives.
According to the Commission, Hungary has set the margin between purchase and retail prices so low that it hinders businesses from covering their costs, compelling non-Hungarian retailers to sell at a loss. Moreover, the Commission asserts that the Hungarian authorities equate the gap between procurement and retail prices to profit, neglecting significant additional costs such as personnel, real estate, and taxes. This situation poses a risk to employment within the affected chains.
Hungary has been granted a two-month period to respond and adjust its national regulations. Should the response be deemed insufficient, the Commission has the authority to escalate the matter to the Court of Justice of the European Union.
In this context, the ongoing debate underscores vital trends within the food and beverage industry. As the food and drink business adapts to regulatory challenges and evolving consumer preferences, stakeholders must stay informed about the latest food and drink consumer trends to enhance competitiveness and safeguard their market position.
