EU takes Hungary to court over price caps

The European Commission is taking Hungary to the Court of Justice of the European Union over national rules that limit retailers’ profit margins on certain food and drugstore items.

In violation of the EU Services Directive

In March of last year, Hungary introduced margin restrictions on basic food products such as milk, meat, eggs, oil, and sugar: retailers are not allowed to charge more than a 10% profit margin on these products. This was followed by similar rules for selected non-food items sold at drugstores. Then-Prime Minister Viktor Orbán sought to use these measures to stop “unjustified price increases.” Initially, these were temporary measures, but in May they were permanently enshrined in law, despite repeated calls from the European Commission to repeal them.

As a result, the Commission is now taking the country to the European Court of Justice. Two separate infringement proceedings are being initiated: one concerning food and one concerning drugstore items. The EU argues that the margin cap primarily affects non-Hungarian companies, and the limit is so strict that retailers may be forced to sell at a loss. Furthermore, the measures violate the EU Services Directive, which is intended to prevent barriers to the single market.

Incidentally, Hungary is not the only European country imposing price restrictions on foreign retailers: Serbia also introduced a similar measure last summer. There, the government limits profit margins on 3,000 products to 20%. This has an impact on the margins of Ahold Delhaize’s stores in the country. The retailer has therefore initiated arbitration proceedings at the International Centre for Settlement of Investment Disputes (ICSID), a division of the World Bank.