EU to investigate Hungarian tobacco cronyism

Nowhere in Europe is it this conspicuous that only those with good relations with the government can sell tobacco products, according to the EU commissioner for internal markets. Hungary could be subjected to a commitment procedure in the near future, index.hu's Eurologus blog is quoted by portfolio.hu.

The dubious regulation of tobacco trade could be the next important issue in which the European Commission launches a commitment procedure against Hungary, Elzbieta Bienkowska, Commissioner for Internal Markets, told the Eurologus blog. 

As portfolio.hu eplains the latest development was that British American Tobacco (which elected Tamás Lánczi, the CEO of Viktor Orbán advisor Árpád Habony’s company, to its board of supervisors a few months ago), and Tabán Trafik, a company owned by János Sánta, won a monopoly concession on tobacco distribution in Hungary, while other companies were most likely not even informed of the opportunity. 

Competitors Imperial Tobacco Magyarország Kft., JTI Hungary Zrt. and Philip Morris Magyarország Kft. indicated that they had no knowledge of the tender but would have offered ten times as much for the concession. This means the government is forgoing about HUF 90 bn in budget revenue over 20 years. 

"There are monopolies on tobacco elsewhere in Europe, but nowhere is it this conspicuous that only those with good relations with the government can sell tobacco products," the commissioner said, referring to the fact that BAT and Tabán Trafik won the concession without an open tender. 

According to sources, the European Commission’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs asked the Hungarian government for a brief on the issue this spring, and a dialogue began but the experts in Brussels were not convinced by the government’s arguments. 

"We must investigate this case thoroughly, because this problem is not even mentioned int he answers we have received from Hungary," the Polish commissioner said. We can not talk about corruption in the narrow sense, but it is obvious that the contracts and business advantages formerly held by foreign companies have moved elsewhere, she added. 

Not quite unexpected

It was not exactly a surprise that a new procedure would be launched against Hungary over this issue. János Lázár, minister in charge of the Prime Minister’s Office said at a press conference yesterday that Brussels received three reports related to the Hungarian tobacco trade and has launched two infringement procedures: one due to the extra tax on the tobacco industry, which is progressive and thus affects certain players much more than others, and the other one appears to be the setting up of a tobacco distributor. Reports on the former case in May indicated that the Commission is already investigating the tax on the tobacco industry, which was introduced earlier this year. 

Government baffled

The Hungarian government is requesting information from the European Commission and from Commissioner for Internal Markets Elzbieta Bienkowska on whether the quotes attributed to her on index.hu regarding the regulation of tobacco trade are genuine, the Government Information Center (KIK) told news agency MTI. 

The government says the commissioner’s statement that "contracts and business advantages formerly held by foreign companies have moved elsewhere" is "baffling and unacceptable". 

According to the KIK, it is the consistent position of the Hungarian government that the EC must take a neutral and purely law-based position on legal matters, and that no commissioner should be a tool used for exerting economic pressure and especially not the "spokesperson for the international tobacco lobby". 

The statement added that Hungary will continue its fight against smoking, and also against international tobacco companies with market dominance. In case the EC does indeed launch an infringement procedure against Hungary over the tobacco distributor, Hungary will fight that battle "using all possible means" until the European Court makes a ruling in the case, the KIK said.