Unprofitable supermarkets legislation passed

Competition

The Hungarian Parliament approved a legislation prohibiting the sale of goods which consumers purchase on a daily basis from big businesses that remain unprofitable for two consecutive years, from 2018. The legislation was passed with 116 voting in favor, 34 voting against and with 25 abstentions.

The sanctions apply to businesses that generate annual revenue of at least HUF 50 bln in two consecutive years, but break even or generate losses. A further criteria is that fast-moving consumer goods (FMCG) must account for at least half of the business' revenue, but the rule does not apply to companies in their first four years of business.

In defense of the rules, the author of the legislation argued that "capital-strong shop chains can allow themselves to generate losses for many years in the interest of driving down prices, thus undermining Hungarian businesses that cannot compete". He also added that "for us to be able to ensure the defense of domestic SMEs efficiently, while also honoring EU rules, we must legislate different rules for different types of businesses".

As of 2018, the legislation also prohibits, the operation of supermarkets larger than 400 sqm in areas of Budapest designated UNESCO World Heritage Sites. The Hungarian capital has two World Heritage sites: the Banks of the Danube and the Buda Castle Quarter, with an area of 451 hectares, and Andrassy Avenue and the metro, with a property area of 58 hectares and a buffer zone of 240 hectares, data from UNESCO show.

Hungary’s governing party Fidesz has a two third majority, with 116 MPs, allowing the party to pass laws with every other parties voting against or staying in abstention.

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