Hungarian government: the profit margin cap just introduced is a huge success

A 10pc cap on markups on some food products at supermarkets in force from Monday has reduced prices by 10pc to 30pc or even as much as 40pc, the spokesman for the National Economy Ministry said in a video message.

Profit margin cap reduces some food prices as much as 40pc

Demonstrating the impact of the government measure to bring down food price inflation, Andre Paloc showed the price of a litre of milk had dropped from HUF 639 to HUF 372, while the price of a container of sour cream had dropped from HUF 959 to HUF 433 and the price of ten medium-sized eggs was reduced from HUF 1,019 to HUF 973.

“The measure is working, with price differences tangible on the first day already,” he added.

Profit margin cap reduces prices 16pc on average

Nagy said at a press conference on Tuesday, a day after the measure came into effect, that a 10pc government-mandated limit on markups at supermarket chains has cut the prices of affected products by 16pc on average.

Nagy noted that the cap, rolled out to bring down food price inflation, applied to around 1,000 products in 30 categories. The scale of the resulting price reduction exceeded the government’s expectations, he added. He noted that the prices of some of the dairy products under the cap, such as milk, joghurt, sour cream and cottage cheese, had dropped by over 50pc.

Nagy warned that the government would apply regulatory measures to suppliers, too, if they didn’t lock in their prices voluntarily.

He said prices of around 760 of the 1,000 products affected had dropped, while the prices of 70 had risen, likely because they were earlier on sale or due to data errors. The government will decide at the end of May, ahead of the expiration of the measure, whether to continue it or take further steps to bring down food prices, he said.

Nagy assured shoppers that store inventories of the affected products, about one-third of supermarkets’ food offering, would be sufficient to meet consumer demand.

As we wrote yesterday, the new cap on supermarket profit margins takes effect in Hungary – key details you need to know

The Competition and Markets Authority prepares investigations in the food trade

The Competition and Markets Authority prepares investigations in the food trade
The Office of Economic Competition (GVH) is preparing investigations in the field of food trade, the Office told MTI on Monday.

In the statement, it was pointed out that the national competition authority is continuously monitoring the market processes in the individual product chains and the market behaviour of individual trade players in order to protect Hungarian consumers, while also keeping the interests of domestic businesses in mind. On this basis, the Economic Competition Authority prepares investigations in the field of food trade and pays attention to prevent the development of anti-competitive cooperation between the market players concerned, which would negatively affect the welfare of consumers.

The Communication recalls that the FCA carried out a number of comprehensive fast-track sector inquiries in the first half of 2023, which revealed that some food retailers had increased the prices of certain basic foodstuffs beyond what was justified.

It then found that in 2022, traders’ profits on some food products – such as dairy products and preserved foods – increased significantly, which, among many other factors, contributed to a significant increase in food inflation.

It was recalled that in March 2023, Csaba Balázs Rigó, President of the GVH, based on the experience of the accelerated sector inquiries in the food sector and international examples, also initiated the creation of an online price monitoring system at the government in the framework of a competition proposal. The system, operated by the GVH and available at www.arfigyelo.gvh.hu , will monitor the daily updated prices of more than 2,000 different food products in 78 product categories in more than 1,200 stores of six major retail chains nationwide. The price monitor provides accurate, up-to-date information on price changes, including price decreases.

According to the online price monitoring system, the prices of several basic food products – dairy products, eggs – fell on Monday as a result of the government’s price freeze, the GVH said in a statement.

As we wrote today, here comes the new price cap: the Hungarian government threatens the banks, details HERE