The European Commission has formally escalated its infringement procedure against Hungary over the government’s retail margin caps, demanding swift changes and warning that the rules could ultimately be overturned by the EU Court of Justice.
In two reasoned opinions sent to Budapest this week, the Commission argued that Hungary’s restrictions on profit margins for food and drugstore products discriminate against foreign-owned retailers and distort competition in the domestic market, Portfolio writes. The government now has two months to respond and amend the legislation. If it fails to do so, Brussels may refer the case to the Court, which could compel Hungary to rewrite the rules.
Photo: Daily News Hungary
Brussels: Rules discriminate against foreign retailers
The Commission objects to the current system, introduced in March 2025, which sets exceptionally low retail margin ceilings. According to Brussels, these caps are so restrictive that businesses (especially foreign-owned supermarket chains) cannot cover their operating costs, forcing them to sell certain products at a loss.
While the rules are formally applied to all retailers, the related revenue-based tax obligations affect primarily foreign-owned companies, as most Hungarian-owned franchise chains fall below the threshold and are exempt. This, the Commission argues, breaches the EU principle of non-discrimination by placing disproportionate burdens on businesses from other member states.
The Commission also warned that the policy poses risks to the Hungarian labour market, noting that the overwhelming majority of employees at the affected retail chains are Hungarian citizens. Any financial strain on these companies could therefore endanger domestic jobs.
The Hungarian government has previously defended the measure by claiming the margin caps simply limit retailers’ profits. Brussels rejected this argument, stating that the intervention cannot be justified by public-interest goals and constitutes an excessive intrusion into market operations.
Photo: depositphotos.com
Inflation context: EU points to distortions
The infringement procedure progresses at a time when the Hungarian central bank reported that inflation returned to the 3 ±1% target range in November for the first time in a year. Analysts widely attribute this improvement to a series of price-restricting policies, including the margin caps and voluntary price freezes. Without these measures, inflation could have been roughly 1.5 percentage points higher, according to estimates.
However, the Commission maintains that artificially compressed margins are neither sustainable nor compliant with EU law. It also emphasised that restrictions must be necessary, proportionate and free from discrimination: criteria it believes the Hungarian framework does not meet.
Illustration. Photo: depositphotos.com
Government response: “Brussels defends the multinationals”
The Ministry of National Economy issued a sharply worded statement following the Commission’s announcement, accusing Brussels of siding with multinational corporations at the expense of Hungarian consumers.
“Today it has become clear that Brussels continues to represent the interests of multinational companies and aims to extract more money to finance Ukraine and the war,” the ministry said, adding that the government was prepared to defend the margin-cutting policy throughout the EU proceedings.
Separate EU action over media freedom
In a parallel move, the Commission also launched a separate infringement procedure against Hungary, citing the European Media Freedom Act, which entered into force on 8 August 2025.
Brussels argues that Hungarian legislation fails to prevent political interference in the work of journalists and media outlets and does not adequately protect journalistic sources or confidential communications. It also criticises Hungary’s lack of effective judicial safeguards in cases where these rights are violated.
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