2013. augusztus 24., szombat

Nationalizing… cigarettes retail sale

There are few better examples to demonstrate the actual workings of Hungary under Orban than the recent case of cigarettes retail sale's nationalization.

It happened in April 2013 that the government surprisingly announced that the retail sale of cigarettes shall be restricted to a low number of specialized shops across the country. All other existing sellers (small shops, supermarkets, gas stations etc) shall be forbidden to sell cigarettes as from July 1. The number of new authorized shops was kept so small that they would have effective monopolies in their surroundings.

The move was explained with the need to curb young peoples’ access to cigarette and with providing work and living for ordinary Hungarian people (as opposed to international retailer groups).

In a matter of weeks, the owners of these new concessions were selected in what was allegedly a fair and open process.

However, more and more cases emerged in the press which suggested that the new concession winners were attached to the governing Fidesz party in one way or another. Among them were many friends and relatives of Fidesz MPs and local representatives, but also people like the chief editor of the national news agency. In some places, the two concession winners were the (Fidesz) mayor and his wife. Most of the winners had never had any retail activities so far.

Parallel it became evident that most existing small shop owners failed to win a concession and were facing closure given cigarettes was their anchor product. The press found out that several of them were approached by the new winners offering ‘cooperation’ in the operation of the new shops.

Evidence mounted that a few government-friendly families have secured vast numbers of concessions. One of the largest winners turned out to be a company named Continental Tobacco, with close ties to Janos Lazar, head of the prime minister’s office and a powerful figure in Fidesz. Later it became known that Continental in fact wrote large parts of the new law’s text.

So the emerging impression was that this entire operation was effectively an expropriation of existing shop owners and others sellers of cigs, and a redirection of related incomes to Fidesz’ entourage.

As a matter of fact, the fixed price margin for cigs was immediately raised from 3% to 10%, thereby providing very respectable incomes to the new shop owners.

Media’s attention turned to the competition process which decided who would win the concessions. They filed information requests to the respective ministry in order to receive insight into the competition documents and scoring of the applications; requests that could not be declined under the existing law.

Fidesz’ two-thirds parliamentary majority reacted quickly by changing the respective information law retroactively and introducing into it the concept of ‘abusive information request’ as a punishable offense.

Additionally, the minister decided to immediately send back to the applicants their applications so they would not have to be shown to media. The press then got hold of some sent-back unsuccessful applications, only to find that those hadn’t ever been opened.

In the meantime, more and more rumors hit the press on how local Fidesz groups were influencing who would win the concessions. One local Fidesz representative claimed that in his city, it was the (Fidesz) mayor and the local Fidesz townhall faction which handpicked the winners. The claim was rejected by Fidesz however then voice recordings emerged which proved just that. Of course, there were no consequences for the involved, except the ‘traitor’ had to leave Fidesz and a campaign was started against him in local media citing alleged corruption cases of his.

Several notions were filed to the state prosecutor but the office (headed by a former Fidesz MP) decided the tapes did not necessitate an investigation as there were no signs of any wrongdoing. One action they did take however, in starting an investigation into whether personality rights of the mayor and Fidesz representatives had been violated by recording their dialogue in which they decided on the concession winners.

There are some more fine details to this story allowing glimpses into the workings of today’s Hungary:

- The conditions of the competition for concessions required that anyone competing would wiave any right to legal action against the decision.

-  Some 1400 out of 3200 total municipalities in Hungary remained without a cigs shop, meaning it is simply not possible to buy cigs in these villages today. The reason is that there were no applications from these, partly because the law placed strict requirements on the new shops necessitating often costly investments which many could not finance. The government reacted quickly: existing retailers of all kinds in these rural areas received official letters telling them they have been ‘appointed’ to sell cigs in their villages and urging them to file a respective application.

- When the press got full of stories of existing shop owners who’d lose their living, PM Orban himself got active and stated that 'the state must ensure the continued livings of these people'. Soon an official state aid program was announced. Later it came out that the eligibility criteria were so that less than a quarter of existing owners could participate.

- The government made sure the new status quo could not be changed easily by a future government. The contracts signed with the winners stipulate that if the concessions were to be revoked, or further sellers be allowed into the sector, then the government would have to pay enourmous fees to the concession owners.

- As regards state and Fidesz-friendly media, they were largely silent for much off the time. When the topic became too apparent, they ran a campaign claiming that the concession winners were close to the opposition Socialist party. Seriously. They presented two winners as evidence; however the alleged affiliation to the Socialists turned out to be false in both cases.  Also they claimed that the cigs producer Phillip Morris was behind the ‘organized campaign’ against the new law, along with the obligatory ‘foreign forces want to weaken the government because it protects national interests’ punchline.

- And… rumor has it that alcohol’s next.

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