Large retail chains face tougher regulation under changes coming into force on 1 January 2015 and 2 January 2016.
Irrefutable presumption of dominance
From 1 January 2016, retail businesses will automatically be deemed to be in a dominant position in the retail market for daily consumer goods if their consolidated net turnover (including that of affiliated companies) for that market exceeds HUF 100 billion (c. €314 million).
The retail market to which this applies is that for food products satisfying consumers’ daily needs and which consumers usually consume, use or replace within a year. It does not apply to goods used in hospitality services or to perfumes, pharmaceutical products, household cleaners, chemicals and sanitary goods.
Any business found to have abused a dominant position in the retail market for daily consumer goods after 1 January 2016 faces sanctions under the Competition Act from the Competition Office and the courts.
Prohibition of loss making operations
Undertakings will be banned from any retail selling of daily consumer goods where:
- they derive more than 50% of their net turnover from retail sales of daily consumer goods,
- they have a net turnover of HUF 15 billion (c. € 47 million) or more for two consecutive financial years (the first of which begins after 31 December 2014), and
- they report a loss or no profit in both of those financial years.
The ban will take effect from the approval of the second year’s financial statement (i.e. from 1 January 2017 onwards). New businesses are exempt for the first four financial years after their establishment. Compliance will be monitored by the National Tax and Customs Authority.
It will be interesting to see how retail chains respond to these changes. Similar regulations are in widespread use across Europe to limit the retail chains’ increasing market power and to protect suppliers from abuse by dominant retailers and have led to significant fines in some cases.
Law: Act CLXIV of 2005 on Trade