The European Court of Justice (ECJ) has ruled that Hungary’s mandatory price-reduction and stocking laws for large food retailers violate European Union law. The landmark judgment in Case C-658/24 | Penny Market strikes a major blow against state-driven price controls inside the EU single market, establishing that member states cannot force supermarkets to artificially slash prices at the expense of fair competition.
The legal battle stems from a scheme Hungary introduced in May 2023. Citing economic pressures and soaring food inflation tied to the war in Ukraine, the Hungarian government mandated that grocery retailers exceeding a specific annual turnover threshold must offer deep discounts. Under threat of heavy fines, these large chains were legally required to sell designated food products at gross retail prices at least 15% lower than their lowest price over the preceding 30 days. Additionally, the law forced businesses to maintain strict minimum inventory levels for those discounted products.
The rules faced an immediate challenge after Hungarian authorities fined Penny Market—a major supermarket chain belonging to the German food retail group REWE. During an inspection in March 2024, officials penalized a Penny Market store because two covered items—a specific type of apple and a brand of mineral water/soft drink—were entirely out of stock on the shelves. Penny Market fought the penalty, blaming supply chain delivery delays and noting that a suitable replacement product was made available to shoppers. The retailer brought the case before the Győr High Court in Hungary, which subsequently paused the proceedings to ask the ECJ whether Budapest’s emergency anti-inflation laws were actually compatible with core EU treaties.
The ECJ ruled unequivocally that the Hungarian price-control scheme is incompatible with both the EU’s Common Organisation of the Agricultural Markets (CMO) Regulation and the Directive on services in the internal market. The Court found that the mandate directly undermines fair competition by stripping commercial operators of their freedom to determine their own selling prices and stock volumes based on standard economic considerations.
While the Court acknowledged Hungary’s stated goals—curbing inflation and protecting vulnerable, economically disadvantaged citizens—it ultimately deemed the measures entirely disproportionate and structurally flawed. Because the discount mandate exclusively targets large retailers with high annual turnovers, the affected stores are overwhelmingly concentrated in urban areas. Consequently, the ECJ pointed out that a significant portion of the disadvantaged rural population could not easily access these mandated bargains anyway, proving the law was incapable of consistently achieving its objectives.
Furthermore, the ECJ raised serious concerns regarding potential indirect discrimination against foreign companies. The high court noted that large, domestic Hungarian retail chains appeared to systematically evade the penalties by operating via franchise models—meaning individual stores did not pool their revenues to cross the regulatory threshold—or by filing under different statistical activity codes. The ECJ instructed the local Hungarian court to investigate whether the system intentionally shielded domestic businesses while penalizing foreign groups like REWE, emphasizing that even if no deliberate discrimination is found, the law remains fully invalid under EU service rules due to its arbitrary application.
