EU urges Hungary to abolish price caps

The European Commission is urging Hungary to withdraw the mandatory margin limits for supermarkets and drugstores on a range of food and drugstore products. Budapest is defending the measures, pointing to sharp price drops, and extending the scheme until February 28.

Foreign retailers particularly affected

In mid-March, Hungary introduced margin limits on 30 basic food products such as milk, meat, eggs, oil, and sugar: retailers are not allowed to take more than a 10% profit margin on these products. This was followed by similar rules for selected non-food items at drugstores. Prime Minister Viktor Orbán wanted to stop “unjustified price increases” with these measures. He imposed the measures after talks with supermarket chains failed to produce adequate proposals to keep prices low, according to him.

But the EU does not agree. The European Commission reports that on December 11, it sent two reasoned opinions to Budapest regarding the price caps that have been introduced. According to the Commission, the rules apply to all foreign companies, while they only affect a segment of domestic companies. Hungary has two months to respond and amend its national rules. If that response is insufficient, the Commission may refer the matter to the Court of Justice of the European Union.

The initiative does not seem to be making much of an impression for the time being: the Hungarian government points out that food prices have fallen by an average of 20-24% since the introduction of the margin limits, while drugstore prices have fallen by more than 27%. In view of these results, Hungary is extending the limits until February 28 and expanding their scope to include 13 additional product categories, without specifying which ones.