The Hungarian Government has introduced a 10% cap on retailers' profit margins for 30 essential food items, such as milk, meat, eggs, sour cream, cooking oil, flour, and sugar.
This measure, effective from 17 March, aims to lower prices by over 10% on average. It will remain in effect until 31 May, with the possibility of an extension, if deemed necessary.
Announcing the measure, Prime Minister Viktor Orban criticised the "unwarranted and exorbitant" price hikes, noting that egg prices had risen by 40% and butter and sour cream by over 80%.
He stated that discussions with supermarket chains had fallen short of expectations, describing their proposals for price reductions as inadequate and ineffective for consumers.
Orban noted that four other European countries have implemented similar measures and mentioned that the government has a stricter intervention policy ready if the cap fails to deliver the desired results, according to Hungarian news agency MTI.
Earlier, Hungary's ministry for the national economy urged retailers to lower food prices within a week or face government intervention.
New Regulations
Gergely Gulyas, head of the Prime Minister's Office, explained that the regulation applies to retailers with revenues exceeding HUF 1 billion (€2.5 million) and prohibits price increases on products with lower profit margins.
Compliance checks will begin shortly after the rule takes effect, and violators could face penalties ranging from fines to closure. If supermarkets attempt to offset losses by raising prices on other goods, the government will intervene.
According to Gulyas, the measure is expected to lead to "visible and tangible" price reductions, while at the same time reducing inflation without impacting VAT revenues.
He noted that the government is prepared for potential challenges from the EU but remains confident in the regulation's effectiveness.
Profit Margin Cap
The National Economy Ministry cautioned that non-compliance could lead to the extension of the profit margin cap to all food items, and, as a final measure, regulated pricing could be reinstated.
It also highlighted that food price inflation surpassed 7% in February. It stated that all inquiries, including one from the retailers' association OKSZ regarding the proportion of private-label products, would be reviewed.
Previously, OKSZ argued that the 10% cap on supermarkets' profit margins for certain staples should extend to all participants in the supply chain for the measure to be effective.
The association highlighted that competitive pricing boosts consumer purchasing power and supports inflation control.
