Background
Following Russia’s invasion of Ukraine in February 2022, Hungary declared a “situation of emergency” and exercised emergency legislative powers under Law No XCIII of 2021. To combat rising food inflation, the Hungarian Government adopted Decree 162/2023, which required large food retailers — those with annual turnover exceeding HUF 1 billion (approximately EUR 2.5 million) — to apply mandatory price reductions of at least 15% below their lowest retail price from the preceding 30 days on specified categories of agricultural products, including fresh fruit and soft drinks. Those same retailers were also obliged to maintain minimum daily stock quantities equal to average daily sales in 2022, so as to meet consumer demand at all times.
Penny Market Kft., a Hungarian subsidiary of the German REWE group that has operated in Hungary since 1996, was inspected in February 2024. Inspectors found that apples and mineral waters/soft drinks — both covered by the decree — were absent from the shelves (though in stock elsewhere in the store) and that no sales of those products had yet occurred on the day of the inspection. The regional government authority imposed a fine of HUF 4 million (approximately EUR 10,000) for breach of the minimum-stock obligation. Penny Market challenged the fine before the Győr High Court (Győri Törvényszék), which stayed proceedings and referred two questions to the CJEU: whether the decree was compatible with EU internal market freedoms and Directive 2006/123, and whether it was compatible with the Common Market Organisation Regulation (Regulation No 1308/2013).
The Court of Justice elected to examine the CMO Regulation question first, treating it as the primary EU-law benchmark. In addressing the internal market question, the Court also reformulated it sua sponte, substituting the establishment-chapter provisions of Directive 2006/123 (Articles 14 and 15) for the free-services provision (Article 16) that the referring court had cited, because Penny Market’s long-standing stable presence in Hungary brought it squarely within the freedom-of-establishment framework rather than the cross-border services framework.
The Court’s Holding
On the CMO Regulation question, the Court held that Regulation No 1308/2013 precludes Decree 162/2023. The Court reaffirmed that, while the regulation does not exhaustively regulate all aspects of agricultural trade, free price formation on the basis of fair competition is a foundational component of the CMO. A national measure that compels retailers to sell specified agricultural products at a mandatory minimum discount and to maintain prescribed stock levels directly interferes with that system of competitive price formation and therefore must be assessed for compatibility with the regulation. The Court acknowledged that Member States may justify CMO-interfering measures by reference to general-interest objectives — such as combating inflation or protecting disadvantaged consumers — that fall outside the CMO’s own objectives. Hungary’s stated objectives qualified as such.
However, the decree failed the proportionality test at the threshold “appropriateness” stage. The Court found that the measures did not pursue the stated objectives in a coherent and systematic manner because they applied only to retailers with turnover above EUR 2.5 million — establishments that, as the referring court noted, are predominantly located in urban areas. This meant that a substantial share of food sold across Hungary came from traders entirely outside the decree’s scope, and that a significant proportion of disadvantaged consumers — particularly those in rural areas — would have practical difficulty accessing the mandated price reductions. Because the measures did not genuinely and consistently serve the anti-inflation and consumer-protection objectives they invoked, they were disproportionate and incompatible with Regulation No 1308/2013.
On the internal market question, the Court clarified that the activity of food retailing constitutes a “service” under Article 4(1) of Directive 2006/123, that none of the directive’s sectoral exclusions applied, and that the CMO Regulation and the directive can apply simultaneously because the regulation contains no rules governing specific aspects of access to or exercise of a service activity within the meaning of Article 3 of the directive. The Court further held that, given Penny Market’s stable and continuous establishment in Hungary since 1996, the applicable provisions are the freedom-of-establishment chapters (Articles 14 and 15 of the directive) rather than the free-services chapter (Article 16), reframing the first referred question accordingly.
Key Takeaways
- Free price formation under fair competition is a component of the EU Common Market Organisation for agricultural products; national measures that mandate minimum discounts and minimum stock levels for specified agricultural goods interfere with that system and must be justified and proportionate.
- Member States may invoke anti-inflation and disadvantaged-consumer protection as general-interest objectives to justify CMO-interfering measures, but only if the measures genuinely pursue those objectives in a coherent and systematic manner — targeting only large urban-based retailers does not satisfy that standard.
- Regulation No 1308/2013 and Directive 2006/123 on services in the internal market are not mutually exclusive; both may apply simultaneously to national measures affecting the retail food sector.
- The freedom-of-establishment provisions of Directive 2006/123 (Articles 14–15), not the freedom-to-provide-services provision (Article 16), govern operators that carry on economic activity through stable, permanent establishments in the host Member State, regardless of their foreign corporate origin.
- Emergency declarations by Member States do not create a general carve-out from EU internal market and agricultural law obligations; the ordinary tests of necessity and proportionality continue to apply.
Why It Matters
This ruling — handed down against the backdrop of post-pandemic and war-driven food inflation across the EU — makes clear that emergency price controls targeting food retail are not immunised from EU law scrutiny simply because they are framed as crisis measures. By invalidating Hungary’s scheme on proportionality grounds, the Court signals that blanket price caps applied only to large-format retailers fall at the first hurdle: they cannot credibly claim to protect all disadvantaged consumers when a significant portion of the food supply and the most vulnerable rural populations remain outside the measure’s reach. The judgment builds directly on the Court’s September 2024 ruling in SPAR Magyarország (C-557/23), which struck down earlier Hungarian food-price legislation on similar grounds, confirming that Hungary’s successive emergency pricing decrees face a structural proportionality defect.
For practitioners and legislators across the EU, the case reinforces that agricultural market interventions at the retail level must be designed with internal consistency — reaching all or most of the market segment they claim to protect — or they will fail proportionality review under the CMO framework. The Court’s reframing of the Services Directive question also clarifies the dividing line between establishment and services freedoms for foreign-owned retail chains with long-standing national subsidiaries: once an operator has a stable establishment, the stricter establishment-chapter disciplines (which prohibit discriminatory requirements and require proportionality analysis of evaluated requirements) govern, not the services-chapter rules.