Another stop sign for statutory price control in Hungary

The Court of Justice of the European Union (CJEU) has issued its decision in Case C-658/24, following a request for a preliminary ruling in the case of Penny Market. The Court found that the Hungarian rules requiring grocery retailers with a high annual turnover (exceeding HUF 1 billion in 2021) to apply mandatory price reductions are contrary to EU law. According to the Court, the rules are incompatible with the freedom of establishment and interfere with free competition.

The legislation was introduced by the Hungarian Government in May 2023. It required retailers, during designated promotional periods, to sell certain products at prices at least 15% lower than the lowest prices applied in the preceding 30 days. The legislation also required retailers to maintain minimum stock levels of those products. Penny Market was fined by the Hungarian consumer protection authority for failing to comply with these stockholding requirements.

The CJEU held that these obligations prevent retailers from freely determining both the prices at which they sell their products and the quantities they wish to offer based on normal market conditions. As a result, it restricts competition in a manner contrary to the EU regulation on establishing a common organisation of the markets in agricultural products. Since Penny Market has been established and operating continuously in Hungary since 1996, the Court confirmed that its activities fall within the scope of the freedom of establishment under the Services Directive, which does not allow national measures that, in practice, place foreign-owned businesses at a particular disadvantage. This judgment reinforces the consistent position taken by both the European Commission and the CJEU that national price control measures, adopted to combat inflation, infringe EU law where they disproportionately affect businesses owned by an entity established in another Member State.

In a separate judgment concerning SPAR, the CJEU had already found that Hungary's mandatory retail price cap regime was incompatible with EU law in 2024. In addition, two infringement cases against Hungary are currently before the CJEU regarding a similar issue: price margin restrictions for food-, and drugstore retail in Hungary. Addressing inflation and protecting vulnerable consumers might be legitimate public policy objectives. However, any such measures must comply with the principle of proportionality. They must be suitable for achieving the intended objective and must not go beyond what is necessary to achieve it. The Court also recalled its settled case-law that a national measure can only be regarded as appropriate if it genuinely pursues the stated objective in a consistent and systematic manner. According to recent statements, the gradual withdrawal of the retail margin cap is currently planned by the Hungarian Government.