OKSZ makes proposals to help smooth the elimination of the margin cap

According to the currently effective legislation, the food margin freeze ends on May 31, but the government has also raised the prospect of extending it in several public forums. “This uncertainty in itself is enough to cause confusion among consumers, retail players and suppliers. Given that the margin freeze has already strongly distorted market conditions during its short life, care must now be taken to ensure that its phasing out is smooth for the government, suppliers, retail and customers,” says Tamás Kozák, Secretary General of the National Trade Association.

Retail chains avoided repricing at the expense of their own budgets, so the margin stop was able to fulfill its intended role, however, this contribution of the chains to reducing the burden on Hungarian families is no longer sustainable after May 31, as price increase demands are continuously received from supplier partners.

The proposals are prepared with maximum consideration of competition law regulations and take into account the following aspects:

• The members of the OKSZ perceive every day that the margin stop makes customers uncertain. This entails a reduction in household consumption, which could stop the last engine of GDP that still exerts a significant driving force.
• The margin stop only temporarily supports the reduction of inflation, otherwise it masks the tensions in the system, which are surfacing with increasing force as time goes on.
• Product paths are distorted, which has an import-increasing effect. This may reduce the food industry’s output, net exports, and thus GDP. These distortions can only be restored slowly.
• Due to the falling prices of large chains, smaller players, which account for 48 percent of food retail, are facing a decrease in their turnover, and a significant number of them are preparing to close their stores, which further increases supply security problems. In Hungary, 1,279 food-related retail stores closed last year alone, more than 400 settlements have no stores at all, and in several hundred more settlements there is only one small store with a limited stock of goods that is not suitable for large purchases.

During the margin freeze, retail cannot fulfill its role as an intermediary between suppliers and customers, and it is also forced to restrain developments. These effects can already be felt today – especially by customers with small money – but these harmful consequences will intensify if the margin freeze is maintained.

Taking all these considerations into account, OKSZ will submit loss-minimizing proposals to the government regarding the elimination of the margin stop on May 31.

“We trust that measures aimed at solving the problems of the Hungarian economy will be preceded by extensive consultations. It is advisable to involve all actors involved in the value chain in these consultations, be they producers, suppliers, carriers, utilities or municipalities,”

– says the OKSZ Secretary General.