Brussels has initiated proceedings against Hungary over margin restrictions

According to the Commission, Hungary may have infringed Article 49 of the Treaty on the Functioning of the European Union (TFEU), which guarantees the freedom of establishment for businesses in EU Member States. According to this, national authorities are required to ensure equal treatment for all economic operators and may not take measures that unduly restrict market presence – unless the restriction can be demonstrated to serve an objective of public interest.

The body found that the Hungarian regulation in question sets the permissible difference between purchase and selling prices at a level that no longer covers operating costs for foreign-owned traders. This could result in non-Hungarian companies being forced to permanently sell some of their products at a loss, which would violate the principles of free competition and freedom of establishment.

The Hungarian government has two months to respond to the letters of formal notice sent by the European Commission and take steps to end the practices in question. If this is not done, the Commission may issue a reasoned opinion as the next stage of the infringement procedure, which could even lead to a case before the European Court of Justice.

The current procedure is a new chapter in the debate that is raising tensions between the Hungarian government’s market regulations and EU principles. The outcome of the case could have serious consequences not only from a legal but also from an economic perspective for the domestic retail sector and its international players.