Promotions in stores are mandatory from the first of June

The retail part of the government’s inflation reduction program will begin in the middle of next week, on June 1st. Twenty categories of food products have been designated in the mandatory promotion system, from which the retailer must select at least one product (twenty in total), which must be offered to the customer ten percent cheaper for one week. (The price of the product must be reduced by at least ten percent compared to the lowest gross retail price applied in the last thirty days.)

Lidl’s announcement the other day, in which it indicated that it will give discounts of more than ten percent – in some cases twenty, thirty, fifty percent – on certain products, generated some tension between traders and suppliers. These can typically appear during price negotiations, especially in the short and medium term, magyarnemzet.hu reports.

At the same time, in order to comply with the promotion rules, the government decree stipulates that – in contrast to the main rule in force – selling below the transfer price invoiced by the supplier (or the cost price in the case of self-produced products) is not considered unfair distributor behavior, i.e. traders do not have to fear condemnation in the event that these products are sold to consumers below the purchase price. The regulation tries to resolve the tension arising from this by requiring traders to continue to act with due care, since the regulation already classifies the modification, termination or re-contracting of the supplier contract by traders in connection with the obligation to hold promotions as unfair distributor behavior.

So, in principle, the retailer cannot transfer the additional costs of the promotion to the manufacturer with a few strokes of the pen.

At the same time, there will certainly be some turbulence in the market, because the blatantly low prices are not favorable to the manufacturers either, so they will try to block these efforts. On the other hand, the retailer has a well-understood interest in offering the greatest possible discounts beyond the obligation to hold promotions, since now is the period when customers must be lured back to the store.

Regardless, the industry had a particularly favorable attitude to the rule of the obligation to hold sales and to the accompanying price monitoring database, which is expected to start on the first of July, because it is really conceivable that their effect will be inflation-reducing. By the way, the mandatory promotions will last until September, after which this market-influencing measure will be introduced.