The European Commission on June 18 launched infringement procedures against Hungary over mandatory markup caps on a range of food and non-food products that the government introduced to counter inflation.

The government introduced a 10% mandatory cap on markups for large food retailers in mid-March, covering 30 key food products, including poultry, dairy, flour and cooking oil. The regulation was prolonged until the end of August, despite criticism from market participants and industry groups for its negative fallout.

The measure was extended to non-food items earlier this month with a 15% cap on household items, also in effect until the end of the summer. The measure would apply exclusively to foreign pharmacy chains such as Muller, Rossmann and DM, which account for 40% of the market, according to the Economy Ministry.

The unorthodox measure resembles the 2022 price cap, when large, mostly foreign-owned supermarkets were ordered to roll back prices on a dozen essential food items to October 2022 levels. The measure was also timed before the parliamentary election.

In September 2024, following a complaint by Spar, the European Court of Justice ruled that these price controls and mandatory stockpiling requirements violated EU competition laws. 

Critics argue that this latest market intervention will have negative consequences. Retail association OKSZ also warned that such price interventions could trigger a wave of store closures in rural areas and threaten supply stability.

"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 EC explained in a statement.

The Commission does not challenge the margin cap itself, but objects to its unequal application, disadvantaging foreign-owned companies compared to Hungarian-owned ones. EU rules require equal and non-discriminatory treatment of all market participants. Hungary has two months to respond and address the Commission’s concerns. 

Hungarian authorities have two months to respond to the shortcomings raised in the EC's "letters of formal notice," which indicate the start of an infringement procedure.

Two other infringement procedures against Hungary have been opened recently. One concerns the allegedly non-transparent and non-competitive awarding of a high-value contract for sand and gravel mining rights.

The contract was reportedly awarded without open competition for 20 years, extendable to 30 years. Media reports suggest the case involves the sale of extraction rights from a large quarry previously operated by the German-owned Duna-Drava Cement to a company linked to a businessman with close ties to the family of Prime Minister Viktor Orban’s son-in-law.

The second new procedure demands that Hungary remove charges imposed on market participants receiving free emission allowances under the EU emissions trading system.