Hungary Imposes Profit Margin Caps on Essential Food Items to Combat Inflation

In response to escalating inflation, the Hungarian government has introduced a new decree effective from March 17 to May 31, 2025, aiming to stabilize food prices by capping retailers' profit margins on essential food items.

Scope and Applicability

The decree targets retailers with net turnovers exceeding HUF 1 billion in 2023, including online sellers, and applies to 30 basic food categories, such as fresh meats (e.g., pork, beef, poultry), dairy products (e.g., milk, cheese, butter), bread and bakery items, cooking oils, flour, eggs, rice and sugar.

Key Provisions

1. Profit Margin Cap: Retailers must limit profit margins on specified products to the average margin applied in January 2025 or a maximum of 10%, whichever is lower.
2. New Products: For products not sold in January 2025, margins cannot exceed the average margin of the last month before enforcement and are also capped at 10%.
3. Private Label Products: The proportion of private label products offered cannot surpass the ratio observed during January-February 2025.
4. Product Availability: Retailers must ensure continuous availability of these products, providing at least the average daily quantity sold in 2024.

Enforcement and Penalties

Compliance is subject to inspection, and violations can result in fines:

• Margin Violations: A fine of HUF 5 million (approx. EUR 12,500) per product category for exceeding the allowed profit margin.
• Private Label Proportion and Product Availability Violations: Fines range from HUF 500,000 to HUF 2 million (approx. EUR 1,250-5,000), depending on the extent of the violation.

Multiple fines can be imposed simultaneously and may be applied repeatedly, even multiple times per day.

The introduction of this decree reflects the government's ongoing efforts to stabilize food prices and protect consumers amidst persistent inflationary pressures.