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Purchase limits, rising prices: downsides to the price margin caps in Hungary
On 17 March, the Hungarian government introduced a price margin cap on thirty essential food items, aiming to curb rising inflation by limiting profit margins to 10% until 31 May. While the government hails this measure as a success, citing significant price drops for many goods, there are underlying issues that suggest the policy may not be as effective as claimed.
Price fluctuations and limitations
The initial data shows mixed results. According to Blikk, some products, like tehéntúró (curd cheese) and étolaj (cooking oil), saw substantial price reductions of up to 23%. However, not all items followed this trend. For instance, csirkecomb (chicken thighs) prices increased by 5%, and sertészsír (lard) rose by 17%. This inconsistency highlights that the policy’s impact varies widely across different products.
Moreover, the Országos Kereskedelmi Szövetség (National Trade Association) suggests that the price cap will only be effective if all stakeholders in the supply chain share the burdens equally. This raises concerns about potential shortages or stockpiling if retailers and suppliers feel unfairly penalised.
Emerging store restrictions upon introduction of price margin caps
As a response to the price cap margin, several retail chains in Hungary have started implementing purchase limits on the affected products. This development, as reported by Portfolio, aims to ensure that all customers can access these essential items while preventing stockpiling and potential shortages. For instance, Spar has introduced specific quantity limits: customers can buy up to 3 kilograms of measurable products and 10 units of other items. For larger packaging sizes (over 1 litre or 1 kilogram), the limit is set at 10 litres or 10 kilograms per purchase.
Tesco has also introduced quantity restrictions, allowing customers to buy only one carton of milk and four units of other dairy products per purchase. These measures indicate that retailers are taking proactive steps to manage demand and maintain supply levels, but they may also lead to consumer frustration if shoppers are unable to purchase their desired quantities.
Moreover, Lidl has taken a more stringent approach by completely restricting the sale of price-capped products to customers requesting an invoice for business purposes. This suggests that some retailers are prioritising individual consumers over commercial buyers to ensure fair access to these essential goods.
Long-term sustainability
The short-term price reductions might provide temporary relief for consumers, but the long-term sustainability of the price margin cap policy is questionable. By artificially capping profit margins, the government risks disrupting market dynamics, which could lead to unintended consequences such as reduced investment in the sector or decreased product availability.
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A shopping basket case country.
Price caps never work. The retailer has already calculated everything and set a price for the product that is economically viable. They are not charities but businesses and as can be seen will respond in any way they can to minimize losses caused by price caps. If people can’t afford food they need higher salaries or some form of government assistance. Fidesz keeps returning to price caps which is an admission of failure to provide an adequate standard of living for Hungarians.
I am usually against government interference, including in the operation of the free market. Plus, this measure does come with potential pitfalls, not least of all the stores and supermarkets bypassing it by colluding with other parties along the supply chain. I hope there are measures in place to identify and penalize that.
However, it does make sense, at least morally, that stores must not be allowed to price-gouge people on basic foodstuffs. Even a 10% margin is too high but better than nothing.
Isn’t better that the government reduce the VAT on those products? Same like any other normal country!
I went shopping yesturday and honestly I didn’t see any changes. All the prices remained the same as a week ago.
VAT on food and water should be 0%. No reason to have 27% VAT on water and electricity!
Just ALL crap this TRY again capping by Orban and his “Mob”.
It all will FAIL again and INFLATION – uo up and AWAY – it WILL be.
Orban – the VAT factor – highest in the European Union at 27% – this “Judas” as he is to Hungary and Democracy.
Orban – “fucked” with his VAT because the “stealing” of it at 27% on HUNGARIANS – and secondly, the “other” ways of “income” it generates into the Orban Governments – BANK Account – if the “Judas” reduces that – it will HASTEN – the collapse of Hungary and his personal and his “Heinous” Governments – rightful DOWNFAll.