Hungary: Effects of ban on Sunday trading
A ban on Sunday opening for shops, which came into effect in Hungary in March 2015, appears to have had no direct negative effect on the economy. Overall retail sales have remained steady, and there have been no major lay-offs or closures. Shops have offset the closures by staying open longer on all other days.
The idea of banning Sunday shopping was first suggested in 2011 by the Christian Democratic People’s Party (KDNP), the junior partner in the ruling coalition with the Hungarian Civic Alliance (FIDESZ). The idea was opposed by the Ministry for National Economy (NGM) because of concerns about the possible negative impact on business. The NGM opposed the suggestion again in 2014, and the draft bill gained the full support of the government only after several amendments were made to help smaller stores.
The aim of the act is to provide retail sector workers with adequate rest, protecting their physical and mental health. It also aims to strike the right balance between businesses’ freedom to operate and the interests of workers who work on Sundays. The act clearly states that because families are considered as the most important building blocks of a society, their interests should take precedence over commercial activity.
Customers have switched to Thursdays and Fridays for ‘big shopping’. Most retail workers, although having a guaranteed Sunday rest, have lost the extra Sunday allowance money they would have earned, and are working longer hours on weekdays and Saturdays.
Although the act sets out strict, detailed provisions, some shops are exempt.
Retail days, opening hours and exemptions
The ban does not affect the following types of retail businesses:
- pharmacies and stores operating in hospitals and other healthcare facilities;
- stores located at airports, railway and bus terminals;
- petrol stations;
- military bases;
- penitentiary institutions;
- public markets, farmers’ markets and fairs;
- hotels and restaurants;
- retail activities directly servicing tourism;
- cultural activities or spas.
Mandatory closing on Sundays does not affect services provided to the retail sector as such – for instance, the operation of shopping malls, markets and fairs, or of services facilitating trading such as the storage and warehousing of products.
Small shops with a retail space of less than 200 square metres can also open on Sundays if their workers have at least a 20% stake in the business or are close relatives of the owner.
There are specific opening hours for shops selling certain items, such as newsstands, flower shops and bakeries. These can open on Sundays between 05.00 and 12.00 midday. Shops at sporting facilities can also open during the sporting event.
However, as a general rule, shops have to be closed on all Sundays except for:
- the four Sundays before Christmas (and 24 and 31 December if they fall on a Sunday);
- one further, freely selected Sunday of the year.
On all other days, shops can open from 04.30 until 22.00. The same working hours apply for the exempted Sundays, except for 24 December and 31 December when retailers can open only between 04.30 and 12.00 midday. These general rules apply to all retail activities, irrespective whether such activity is permanent or periodical and whether it has a fixed or variable location.
The Act allows the government to grant exemptions from the law when considering:
- tourism needs;
- shopping habits;
- employee head counts of a given city;
- the local environment.
Consequently, world heritage sites and major tourist areas such as the lakeside villages of Balaton and Velence have asked to be exempted from the restrictions, at least in the peak tourist season or until smaller shops are built to serve visitors. However, the government has refused, arguing that the small shops which are allowed to remain open on Sundays will be enough to satisfy demand.
Dealing with online shopping under the act has proved problematic, but the NGM has declared that packages can be prepared for shipping but not delivered (in Hungarian). However, online traders registered in neighbouring countries such as Austria and Slovakia can deliver products on a Sunday in Hungary.
It is also important to note that the act does not directly ban Sunday working, but restricts shops’ opening hours. Some legal experts suggest that retailers could ask employees to come in to work on a Sunday to do tasks such as packing goods or stacking shelves.
Shopping malls are also allowed to stay open so that cinemas, restaurants, cafes and sport facilities can operate, and many have small retail units, which are exempt.
Opinions of social partners and customers
The act has proven unpopular. An opinion poll carried out by market research company IPSOS Zrt. in March 2015 showed that more than 68% of respondents disagreed with Sunday retail closures (in Hungarian). One-quarter said the ban would make it much more difficult for them to buy basic food or durable goods, with this number rising to 32% among active earners. According to the survey, 22% of respondents regularly purchased food or other household goods on Sundays and 12% shopped for clothing, furniture or electrical appliances. Fewer than half the respondents felt it would be easy to rearrange their shopping routines, while 8% were apprehensive about how they were going to manage. Similar findings have been recently published by two other major public-opinion research companies, TÁRKI and Medián Közvélemény - és Piackutató Intézet. They found that – repsectively – 59.2% and 62% of respondents were opposed to the new law.
Two major national social partners, whose members have been strongly affected by the restrictions, the Democratic League of Independent Trade Unions (LIGA) and the National Association of Entrepreneurs and Employers (VOSZ), have opposed Sunday closures. VOSZ has repeatedly argued that the regulations would distort competition, could lead to around 20,000 job losses and would eventually result in budget shortfalls. LIGA are concerned about redundancies and income losses. They have put forward several proposals to relax the restrictions, such as making Sunday work voluntary or more expensive for employers, and allowing only on a limited number of trading Sundays.
The National Federation of Workers’ Councils (MOSZ) supported the planned restrictions provided that Sunday closures would not lead to the loss of workers’ income, redundancies and increased work load.
The Trade Union of Commercial Employees (KASZ), affiliated to Hungarian Trade Union Confederation (MaSZSZ), and yhe Hungarian Trade Association (OKSZ) have both criticised the Sunday closures. However, the views of their affiliated organisations have become so disparate that it has become difficult for them to make a common stand.
The Hungarian Council of Shopping Centres (MBSZ) warned that the legislation would have a negative economic impact, not only on retailers but also on cinemas, restaurants, cafes, and sports facilities in malls and hypermarkets. However, Hungary’s three major domestic retailer chains, CBA, COOP and REÁL, which together employ 77,000 workers, fully supported the Sunday closures, even though most of their stores are affected by the ban.
A proposal by LIGA and VOSZ for a referendum on the matter, put forward before the ban came into effect, is still being considered by the National Election Office. Even though the act was adopted in March, LIGA and VOSZ announced at the end of March that they intended to turn to the Constitutional Court to argue that the act was not drafted according to the current rules on legislative procedures. These initiatives require an impact assessment as well as enough time for the preparations for a referendum. They also believe that the act discriminates between retail businesses on the basis of size and ownership.
The government, under pressure from the bill’s opponents, revealed that an opinion poll it had commissioned in 2011 also found significant opposition to a Sunday trading ban (in Hungarian, 9.76 MB PDF). Just over half (54%) of the 800 respondents opposed Sunday closure, with resistance from people above the poverty line being even stronger (74.9%). The survey also showed that 18.5% of ‘big shopping’ was done on Sundays, and 69 % of Sunday shopping took place at multinational retailers. The government has not commented to what extent this previous opinion poll was taken into consideration when the KDNP reopened the debate on Sunday closure.
First effects of ban
Since the act came into effect overall retail sales have slightly improved (in Hungarian). Based on data from the National Tax and Customs Authority (NAV), the daily retail turnover averaged HUF 22 billion (about €70 million as at 28 September 2015) between mid-March and mid-April, while figures were around HUF 20.3 billion (approximately €64 million) between January and mid-March.
These figures, however, might be just a reflection of the usual retail increase normally seen in spring, especially around Easter.
Data provided by NAV clearly show that, on the basis of online sales, the greatest customer traffic is on Thursday and Friday. In contrast, retail sales on Sundays have practically halved, from the former turnover figures of HUF 11–14 billion (€35–44 million) to HUF 5–6 billion (€16–19 million). On Thursdays and Fridays, the daily turnover was higher (by 24% and 21% respectively) than before the act came into force.
The data available from NAV cannot, so far, show how much the shops that remain open on Sundays have benefited from the lack of competition. Distribution of turnover data by the retail space of shops or the categories exempted from the act is not available. Therefore, it cannot be confirmed that the act has achieved its stated aim of reshaping the market in favour of smaller domestic retailers over big international ones.
The immediate response of the major chains such as Tesco, Spar, Aldi and Lidl was to lengthen daily opening hours (and thus working hours) from Monday to Saturday. Other stores not directly hit by restrictions followed suit. No assessment has been made of the effect of longer working days on workers and their families.
There have been mixed effects on people’s wages, according to trade unions. For example, workers used to get an overtime supplement of 50% of their wages for working Sundays. Now they are paid only 30% more for working overtime at other times of the week. However, on the few Sundays they are allowed to work, the wage supplement has doubled from 50% to 100% of the basic wage (as of 27 March).
In the 22 shopping malls in Budapest and the 28 outside the capital, visitor numbers have more than halved, even in malls containing cinemas. On 22 March, the first Sunday after the act took effect, fewer than 10% of the units in malls without cinemas were open, and approximately 17%–26% of units, mainly restaurants, were open. Roughly half of the shopping malls without cinemas have now decided not to open on Sundays at all, which means that exempt units within them are unable to do business. Restaurants and cafes in shopping malls have complained that their revenues have fallen by about 20%–25% while, in some cases, mall operators have levied higher rental for businesses that are open on Sundays.
Although the major aim of the Act is to provide free Sundays to retail workers and their families, no information is available on how Sunday closures have actually increased the time that families could spend together on that day, and how they have used this ‘family time’.
Sunday closure has become a particularly contentious issue over the past few months. Reasons for this include:
- the fact that most people have been forced by an administrative measure to adjust their shopping habits; apart from being inconvenient, this has been often interpreted as an intrusion into private affairs and freedom of choice;
- the very different positions of the economic actors concerned (ranging from Europe-wide chains such as Tesco, Spar, Aldi, Lidl to small, family-run domestic shops);
- the varying effects of the ban on retail workers, depending on whether the shop where they work remains open;
- the complexity of the retail activities covered by the act, including e-commerce;
- the amount of retail turnover at stake.
The immediate economic and social effects have been better than expected, and retailers and customers are getting used to the new regulations relatively quickly. However, the impact of forcing larger retailers to close on Sundays is still to be evaluated. It is far-reaching and difficult to predict.
It is hard to say whether the Government will continue preventing further workers from having to work on Sundays. It is interesting to note, however, that people who are meant to benefit from this act have not yet expressed much appreciation for it.