The European Commission (EC) has referred Hungary to the Court of Justice of the European Union (CJEU) over rules capping retail price margins, arguing they primarily impact non-Hungarian retailers.

Introduced last year, the disputed rules cap the difference between purchase and sale prices at 10% for specified food items and 15% for certain drugstore goods.

Retailers were also required to sustain sales volumes at levels recorded before the rules took effect.

According to the EC, retail operations involve considerable expenses beyond the cost of goods themselves, covering staffing, logistics, warehousing and property.

It calculated the average margin across the sector at 30% for food retail and 35% for drugstore retail, compared with actual profit margins of approximately 3%-4%.

The EC argued that the margin cap, combined with the volume requirement, results in financial losses for retailers already operating in Hungary while discouraging new entrants from joining the market.

Hungary first applied the measures temporarily through government decrees, renewing them multiple times, before converting them into permanent law in May 2026.

The EC rejected Hungary's reasoning that profit is simply the gap between what a company pays to source a product and what it charges to sell it, noting this fails to account for costs such as wages, property and tax obligations.

In the EC's assessment, the rules risk imposing discriminatory and disproportionate conditions that breach the Services Directive, along with obstructing the right of establishment protected under Article 49 of the Treaty on the Functioning of the European Union.

It said the measures negatively affect how businesses can enter and operate within the sector.

Under the Services Directive and Article 49 TFEU, public authorities are obliged to guarantee equal treatment and non-discrimination among economic operators, and to avoid constraining economic activity except where justified on public interest grounds.

The EC has referred two distinct cases to the CJEU: one addressing restrictions on food retailers' sales of food products, and a second covering comparable restrictions on drugstores' sales of non-food items.

The EC issued letters of formal notice in June 2025, followed by reasoned opinions in December 2025.

Having determined that Hungary continues to breach EU law, it has now escalated both matters to the CJEU.