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Spar Austria CEO Hans Reisch, in an interview for the economic news portal Lebensmittel Zeitung, has accused the Hungarian government, pointing a finger at Prime Minister Viktor Orbán by name, of increasing harassment of foreign retailers through special taxes and price freezes. The language used in this extraordinary attack, however, resembles that of Ryanair’s controversial boss, Michael O’Leary, rather than a measured business leader presenting factual arguments.
In the article for the news site, Reisch revealed his company’s decision to withdraw some of its assets from Hungary for fear of “expropriation.” By doing so, he reportedly aims to protect its assets from what he calls the “clutches” of Hungarian Prime Minister Viktor Orbán. Reisch also recalled that in June last year, the European Parliament had expressed its “concerns” over what they alleged were an increasing number of cases of companies being taken over by oligarchs close to Prime Minister Orbán.
One of his complaints was that the Hungarian government recently raised the special tax on retail companies from 4.1% of net sales to 4.5%, which according to the multinational retailer had increased their costs by some EUR 90 million. In an interview for Die Presse, Reisch also alleged that
…we were told relatively openly that if the state took a stake in our company, things would be much easier. We are now hoping in Brussels.”
A few days ago, the Financial Times reported that SPAR had lodged a complaint with the European Commission accusing Hungary of breaking EU law.
In its reply, the Ministry of National Economy called Mr. Reisch’s words “untrue and malicious allegations.” In a strong-worded statement, they stressed that the retail sales tax has been declared lawful by the Court of Justice of the European Union. All other allegations are unfounded.
In order to curb high food inflation, the government introduced a price freeze on basic foodstuffs. SPAR, based on its communication, disagrees with these government measures. This behavior is against the interests of Hungarian consumers.
The Ministry of National Economy stresses that the attacks on the government are not based on the measures formulated by SPAR, but on the unprofitable economic situation of the retail company concerned.
SPAR Magyarország Kft. is inefficient, as it has a higher cost structure than its competitors and is underperforming in both market and price competition. Instead of taking steps to strengthen its efficiency and competitiveness and entering into price competition on the market, it is spreading unfounded falsehoods in desperation,
reads the statement.
Only those companies which, in addition to their law-abiding behavior, take into account the interests of domestic consumers, i.e. offer Hungarian families good quality products at a good price, will be allowed to remain on the Hungarian market, the Ministry’s statement concludes.
Windfall taxes and price caps are also effective for domestic companies, including those owned by well-known Hungarian power-figures, and do not exclusively target foreign retailers. Similar measures protecting consumers against the skyrocketing prices of essential commodities, such as energy and food prices, have been introduced throughout the EU, including Hungary’s neighbors, Slovakia and Romania.
Whether the complaints are well founded or not will no doubt be decided by the relevant authorities. Yet it is the language that the SPAR CEO uses in the context of his complaints that could discredit his efforts in highlighting a problem that may otherwise be justified. The emotionally and politically charged narrative that Mr. Reisch has approached his complaint with will no doubt leave some of the retailers’ customers, partners, and employees in an uncomfortable mindset, wondering if the company boss is seeking a legal remedy for the issues at hand, or wants to achieve it through a media campaign and by cozying up to the Hungarian Prime Minister’s well-known political opponents home and abroad.
The language that the Austrian businessman uses is without doubt one that he would never use in dealing with Austrian politicians,
at least there is no precedent for that. Its bitter undertones and casual allusions to a Hungarian oligarchy and atmosphere of intimidation give an impression that we are dealing here with an archetypal anti-government politician, rather than the boss of the second largest retail chain in the country.
In the past, the company had several run-ins with Hungarian regulators, such as in 2015, when the Hungarian Competition Authority (GVH) issued a penalty of HUF 43 million (EUR 110.000) for the supermarket chain engaging in unfair commercial practices. Again in 2021, Spar had engaged in unfair business practices in the case of several food suppliers by obliging them to pay a fixed bonus without defining a measurable sales target. The National Food Chain Safety Office (Nébih) had imposed a fine of HUF 80 million (EUR 203.000) on Spar Magyarország Kft.
By the same token, the business leader is using an old, outdated concept of oligarchy to describe the company’s predicament. In its old meaning, oligarchy refers to a political environment where affluent business leaders, instead of creating an effective and professional corporate leadership, attempt to tilt the economic processes to the benefit of their own corporate interests through government contacts. In the emerging global business environment, however, where supranational organizations, such as EU institutions, politically engaged non-governmental organizations, and media are increasingly expropriating competences from democratically elected national bodies, the meaning of oligarchy has been redefined from the ground. In this context, the most effective approach to tilting the business environment to suit one’s corporate interests is through the above actors, via hybrid means.
Hungary’s opposition left-wing media has duly interpreted Mr. Reisch’s complaints with headlines such as “Austrian Spar Group on the run from Viktor Orbán’s oligarchs,” a type of headline enabled directly by Mr. Reisch’s politically charged language. Although the SPAR leaders’ allegations of an increasing harassment of foreign businesses are somewhat contradicted by the record foreign investment that is growing year-by-year in Hungary,
any justified complaints he had will potentially affect their credibility when a business leader in his position employs language reminiscent of a left-wing anti-Orbán activist.
This is no doubt bad for business, and bad for social discourse in which corporate leaders should lead by example, with respectful and moderate communication, as well as appropriate problem solving.
Featured Image: Hungary Today