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Hungary proposes new legislation for big retail chains

RBR Staff Writer Published 21 November 2014

A new law on Tuesday was submitted in the Hungarian parliament, which proposes the closure of big-wig retailers that show losses for two consecutive years.

Retail law

The new bill specified that retail giants having over 50bn forints ($205.04m) yearly turnover would have to shut shop if they are not able to break-even or show losses for two consecutive years.

According to Viktor Orban, prime minister of Hungary, the legislation has been drafted for the protection of consumers against crooked businesses, although there are chances of it affecting foreign retail brands.

In his comments along with the draft bill, economy minister Mihaly Varga stated: "Posting losses on a sustained basis indirectly represents an abuse of dominant market position, because competitors are forced out and the enterprise with a strong capital position 'buys up' the market."

For their business in Hungary, most foreign retail chains do not reveal financial results.

In a compilation by Figyelo, a Hungarian business weekly, Holland's Spar, Britain's Tesco and French retailer Auchan were all over the 50bn forint bracket. All three retailers had no immediate comments to make.

Other outside retailers in this Central European nation comprise the German companies Aldi, Lidl and Penny Market.

As per the Hungarian news agency MTI, Rudolf Staudinger, chairman of Spar Hungary's supervisory board stated on September 18 that the new draft bill, in conjunction with some previous governmental actions, would force their hand to defer investments.

Another proposed increase on a levy regarding food safety supervision might also affect the big retailers doing business in Hungary.

Already extra taxes have been imposed on energy and telecom companies by the Hungarian government. At the same time, the banking sector is expecting some relief scheme from the government to bail mortgage borrowers, though it will burn a big hole in the pockets of lenders to the tune of billions of euros.

Image: New law for Retail. Photo courtsey of Freedigitalphotos.net.