Hungary seeks to turn the screws on international retailers

By bne IntelliNews March 9, 2017

The Hungarian government threatened on March 8 to introduce a tough new package of laws on foreign supermarket chains operating in the country.

The announcement follows two weeks of rhetoric against retailers and the international brands they sell. Hungary, the Czech Republic and Slovakia claim that products sold in Central & Eastern Europe are of inferior quality to those further west. Budapest has long sought to take a grip of the retail sector, although opposition from home and abroad has largely scuppered those efforts up to now.

However, it appears the government is ready to have another go, encouraged by the branded goods issue. Janos Lazar, Prime Minister's Office chief, and National Economy Minister Mihaly Varga unveiled their plans for a series of draconian laws on foreign supermarket operators—including a HUF20bn yearly car park tax—to MPs in parliament.

The government will cap advertising spending on an annual basis and stop free bus services to hypermarkets. Foreign retail units would also be forced to hire more employees and pay them double for working on Sundays. Discount deals for multiple purchases would also be prohibited. 

The government was furious when opposition groups won the right to hold a referendum on a ban on large retailers opening on Sundays. Rather than lose the vote on the contentious issue, the ruling Fidesz party chose to lift the legislation just a year or so after it came into effect.

The ministers said the government is still considering whether to pass the law. Hungary was forced by the EU to climb down on a special tax on large retailers in 2015.

"We are sure the international chains will turn immediately to Brussels regarding any government action against them,” Lazar said. “The government's purpose is not to boost the profits of international chains but to improve the plight of domestic sellers, so we will meet any battle from Brussels,” he added.

UK firm Tesco is the largest foreign supermarket chain in Hungary, and one of the country's biggest employers. Other multinationals with a large presence include France's Auchan, Dutch chain Spar, and relative newcomers Lidl and Aldi of Germany. It is so far unclear whether the CBA chain, which is Hungarian-owned and close to the ruling Fidesz party, would be affected by the proposed legislation. 

The Visegrad Four countries (Czech Republic, Hungary, Poland and Slovakia) last week urged the European Commission to end the alleged disparity of branded food quality. In February, the opened an infringement procedure against Hungary over rules on the sale of agricultural and food products.

Budapest said last summer that it was looking for solutions that would allow it to "restrict" the participation of multinational companies in the retail sector without provoking the ire of the EU. The government was also reported to be mulling a new special tax on multinational retailers, in an attempt to boost domestic ownership in the sector, although no new regulations have emerged yet.

 

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