Fidesz, the tobacco monopoly, and the tobacco industry’s lobby

As soon as I read that Fidesz wants to make the sale of tobacco products a state monopoly I became suspicious. The legislation, about which naturally Magyar Nemzet learned first, was ostensibly designed to prevent young people under the age of eighteen from purchasing cigarettes. Because, as the story goes, some stores–especially supermarkets and hypermarkets owned by multinationals–are awfully lax. They don’t bother to check the IDs of young people. But, just wait! The new “tobacco shops,” naturally called “national tobacco shops,” will be much more vigilant. Moreover, there will be very few such shops. Towns with a population of fewer than 2,000 will be allowed to have only one such shop. One for every 2,000 inhabitants in larger towns. All told, there will be only 7,000 national tobacco shops in the country. The state will hold a monopoly on the product itself and will establish these national tobacco shops as concessions.

I immediately envisaged 7,000 pro-Fidesz Hungarians as the lucky recipients of these concessions, although some people claim that the profit margin on cigarettes is so low that the owners of the concessions will not make a decent living. But what about a couple, both receiving old-age pensions? Such a shop might be a bonanza for them.

Of course, the idea is not at all new. On the contrary, it is a very old idea. I’m not 100% sure of the date, but it might have been prior to 1950 that the sale of tobacco products was a state monopoly and there were specifically designated shops for that purpose called “trafiks.” They were given out as concessions to older women whose husbands had died in the wars. Naturally, one needed a friend in government service to promote one’s cause. As far as I know, these people made only a very modest living.

Fidesz politicians who concocted this latest brainstorm looked around in Europe to see whether they could find a similar setup, and they came to the conclusion that Austria offered a perfect model. But, reading a bit on the Austrian case, I came to the conclusion that, as usual, the Orbán government is on the wrong track. It is true that until 1998 tobacco was a state monopoly in Austria, but European Union requirements changed “the malign though seemingly cosy participation in government policy of Austria Tabak, the state monopoly that dominated the Austrian tobacco industry.” It was partially privatized. And that is not all. If Fidesz is so worried about the high number of smokers in Hungary, they shouldn’t look to Austria. “If Germany is the bad boy of western Europe, in tobacco control terms, it is high time to meet its little brother. Austria, with just a tenth of Germany’s population, possibly has an even worse record for lack of action to protect its citizens from tobacco.”


An Austrian tobacco shop

So, surely, Fidesz’s eagerness to adopt the so-called Austrian model has mighty little to do with concern over the health of Hungarian youth. Moreover, handing out concessions to 7,000 party sympathizers is not a good enough reason to introduce such a vast change in the retail system. A third possibility, and this is the one I was originally guessing as the driving force, is that the state would like to receive even more money from the sale of tobacco over and above the fairly high excise tax on cigarettes. Well, that’s one of the reasons but there is another one, even more important it seems.Austria’s 8,000 tobacco shop owners are the leading lobbyists against any kind of anti-smoking legislation. The highest number of teenage smokers in all of Europe can be found in Austria. Tobacco shops or not. Worse statistics than in Hungary or Germany.

Although János Lázár, the man behind the proposed legislation, in public seemed to be very sure that the Hungarian law on state monopoly and tobacco shops conforms to European Union guidelines, deep down he must have had doubts because in the last minute the Hungarian government sent the proposal to the European Council asking for final approval. As soon as the text of the proposed law appeared on the European Council”s website, Napi Gazdaság noticed the name of János Sánta, a principal in a Hungarian-owned tobacco company called Continental Dohányipari Zrt. He was the last person who made changes in the proposed law.

It turns out that János Lázár relied heavily on the “advice” of Continental Zrt. all along. A division of Continental Zrt. is actually situated in Hódmezővásárhely where Lázár is the mayor. Apparently Lázár’s relations with the owners of the company are excellent. The piece of legislation was written with a view to giving an advantage to Continental in the Hungarian tobacco market over its competitors. The legislation most likely will result in discrimination against foreign companies like Philip Morris, the British American Tobacco (BAT), and Imperial Tobacco. Currently, these multinational companies account for about 85-90% of the Hungarian cigarette market. Continental’s share is therefore no more than 10-15%. If, however, tobacco became a state monopoly the Hungarian state could decide to which companies it would give purchasing preferences. Continental surely would greatly benefit from such an arrangement.

More and more government edicts and pieces of legislation are aimed at giving an unfair advantage to Hungarian companies over multinational companies, which is illegal under European Union rules. It is therefore unlikely that Brussels will accept this piece of legislation. Apparently, the government has a Plan B for such an eventuality. The government would allow cigarettes to be sold in supermarkets and gas stations, but these outlets would have to buy the cigarettes from the “national tobacco shops.” I don’t think that this modification will comfort the bureaucrats of Brussels.


  1. When my mother-in-law mentioned this on the phone a day or two ago, I assumed it was a misunderstanding.
    Government owned tobacco shops, and none in villages with less than 2,000 people? Planet Hungary is getting weirder by the minute.
    Incidentally, my ma-in-law also said that smoking is going to be prohibited almost everywhere. And not just in restaurants, pubs, etc, but in “all public places”. Is this also true?

  2. Paul: “And not just in restaurants, pubs, etc, but in “all public places”. Is this also true? ”
    Yes. Villages under 2,000 will one one tobacco shop.

  3. One of the things that I really noticed on my first visits to Hungary was the amount of smoking.
    This was well before the smoking ban in the UK, but even then the difference in the level of smoking was really noticeable.
    And, although it has improved since, it still strikes me as pretty high. If my perception is accurate, these measures are going to hit very hard.
    I am rather puzzled by all this – why is OV doing something that’s going to be pretty unpopular*, when he doesn’t have to?
    *The ban on smoking in pubs in England is said to be the main cause of the huge number of pubs that have closed recently (they are said to be closing at a rate of 50 a week!). So, although the ban was generally popular, its effects have been less so – if this rate of closures goes on, one of the cornerstones of traditional British life will soon have virtually disappeared in many areas.

  4. Paul:”Incidentally, my ma-in-law also said that smoking is going to be prohibited almost everywhere. And not just in restaurants, pubs, etc, but in “all public places”. Is this also true?”
    This is becoming the norm in the US. What’s wrong with it?

  5. Well I guess we know why the word “dohány” in the Hungarian slang means money.
    There was also a short lived modification in December that allowed people to smoke in casinos then a week later another rushed legislation changed that too, some say accidentally.
    All this will result in a drastic increase in tobacco product smuggling mainly from Ukraine. We will be like Romania where the 1/3 (!) of the tobacco sales are from smuggled cigarettes.
    At least the moonshine production is legalized. For now. At least until some FIDESZ guy goes into the alcohol retail business. Cigarettes are dangerous: they make you think. You should rather drink if you want to kill yourself.

  6. What worries me about all the nationalization and centralizing so many decisions (“plaza law” – who can build a shop bigger than x m2, or who can call themselves a church, who is going to be head of secondary school X etc., all to be decided by one ministry or the other) is this: is Orban’s government so not worried about losing the elections in the near future that it doesn’t even occur to them that within 3 years all this authority might belong to someone else?
    Are they mad that they are this short-sighted?
    Or do I completely misunderstand something?
    Please tell me it’s just me…

  7. London Calling!
    Since the ban on cigarettes in public places in England has been in place there have been unintended consequences.
    People are living longer! Pressures on private pensions and in the public sector have resulted in larger financial pressures too. In addition at the other end revenue taxes are reduced because so many people are giving up.
    And in the middle those people who excluded themselves from the gene pool by dying quickly at retirement are now living longer too – with greater pressures on the health service.
    So Orban will find his pot of taxation gold may be short lived if too many people give up smoking.
    As you all know – an awful lot of people smoke in Hungary – even in a restaurant the people at the next table will light up with some of the strongest foulest tobacco known to man. Even in an open air market it’s sometimes unbearable.
    As an Englishman I find it hard to stay quiet when someone is polluting so comprehensively the air that I am trying to breath – but hey I’m in a foreign land!
    Did you know that 6,000 Hungarians managed to give up smoking for good last year? (They died of lung cancer!)
    The population is already growing older without them giving up smoking as well! Only 2.6 million of the population work for goodness sake – and the young are leaving in droves to work abroad.
    Hungarian smokers are doing their patriotic duty by dying young – so my message to Orban is – keep them smoking – keep the taxes rolling in – and protect the health service!
    Market those fags!

  8. “This is becoming the norm in the US. What’s wrong with it?”
    GDF – where did I say there was anything wrong with it? It is, thankfully, already the norm in the UK.
    I am totally in favour of it. In fact I would favour an outright ban. If there’s one thing I hate almost more than treading in dog muck, it’s breathing in some selfish smoker’s cigarette pollution.

  9. Charlie – another big shock to me on my first visits to Hungary was the few old men there were. Lots of old women, but hardly any old blokes.
    I know this is true in most (all?) countries, but it’s really noticeable in Hungary. In fact I can think of half a dozen men in their 50s and 60s I’ve known who have died in the 11 years since, but, offhand, not a single woman.
    Mind you, it’s not just smoking – the diet doesn’t exactly help!

  10. “within 3 years all this authority might belong to someone else?”
    Not too likely to happen though, is it?
    I doubt it it’s occurred to anyone in Fidesz that they are likely to lose an election in their political lifetime. They’ve had a few hiccups, but basically their ‘revolution’ is complete.

  11. cheshire cat:”Are they mad that they are this short-sighted? ”
    They are probably both mad and shortsighted.

  12. @cheshire cat: “ I completely misundertand something?”
    I’ve been saying all along that the only way Orban doings make sense is that he is out to do maximal damage to the country. In the first instance, to get the EU to ‘evict’ the country. In the second instance, for the country to turn to the only country that will, magically, come to its ‘aid’–Russia.
    God help us all.

  13. Hey what good is a piece of legislation if a good lobbying group isn’t involved. A few years ago the government was going to allow over the counter pharmaceuticals to be sold in Tesco, Spar et el… and just before passing the bill they decided to ask the pharmacists about the scheme and gee.. what do you think they said. ;-). It was sad watching the poor Tesco employees dismantling the displays that were never used but I must say we have a friend that owns a few pharmacies and It’s nice to she her driving big new shinny BMW parked outside when I’m in buying aspirin.
    +1 on the smuggling comment. Being so close to the Ukraine and Romania where cigarettes are so cheap I often saw border patrol guys setup on some random back road stopping cars looking for contraband. Come to think of it, I’ve not seen this for quite some time. I think it stopped when Fidesz came into power and to come to think of it, most of the road blocks where setup on roads to Debrecen. Hummm.

  14. London Calling (2)
    Living-With-It-In-Hungary: Don’t get me started on the Pharmacists of Hungary! – Shocking! Shocking! Shocking!
    I have been amazed at the attitude of so-called professionals in the pharmacies.
    My partner’s mother in Gyor needs a medication that can only be obtained through prescription. This medication is unavailable in the pharmacies due to supply problems. The doctors write the prescriptions KNOWING that the drug is unavailable and the pharmacists just look at you blankly when you present the prescription. All they can do is recommend other pharmacies. You try another four pharmacies with the same result – and you understand why the ‘Longed Faced Hungarian Grimace’ (LFHG) is so prevalent.
    Even when you appeal to the integrity and and professionalism of the white-coated pharmacist and insist that they obtain the drug through their network – and point out that they must honour their so-called service level agreements – they just employ the LFHG. This is a shameful situation in Hungary for what is a life-supporting and necessary drug. Yes – a matter of life and death.
    And anyway – why do I need a white-coated, so-called professional to sell me Aspirin? Why aren’t the supermarkets allowed to sell self-medication drugs? “All professions are a conspiracy to the laity” wrote George Bernard Shaw. It is certainly true in the world of Hugarian pharma – or is it Fidesz and their Cartels?
    (The end of this story is that, to my amazement, the drug is available off prescription and relatively cheaply in England so we send three-months supply at a time – and take more on our visits).
    Get rid of the white coats – give it up to the efficiency of the market – Tesco’s! (They’re British you know!)

  15. What Fidesz is busy doing is to secure all of Hungary’s wealth for themselves. They are locally building ‘cartels and monopolies’. They go after those businesses which are successful with low overheads and operate mainly on cash.
    They make ‘offers’ you cannot ‘refuse’ and take the place over. When the ‘group’ has collected the ‘lot’ they shut most of them down and quadruple the prices. What about service – Forget it!
    As to the new monopoly of ‘baccy’ they will be in more trouble with E.U.
    As to non-EU support LOOK AT THE MAPS! I know Hungarians are little aware of Geopolitics and most of them cannot read maps. Hungary is surrounded by the EU or EU friendly countries, with one exception which is the Ukraine. However the Ukraine is not exactly ‘pro’ Russia.
    Think what would happen if Hungary left the EU. EU customs posts would be re-manned at all frontiers. Import duties and transit deposits would be imposed (pay in Euros at the border posts). Money destined for Hungary would be diverted to build new roads through Slovenia, Serbia into Romania. Another route would be through Slovakia through the Ukraine (with a ‘bit of bribery’) to Romania.
    Please be aware of the ‘treaties’ that Hungary has signed. The present Hungarian Government is either ignorant of them or ignores them.

  16. London Calling, There are German/Austrian pharmacies taking advantage of the gap via mail order. Before we found them I spent a lot of time on my out of country trips gathering meds for my mother-in-law that are necessary to maintain the little eye-sight she has left that she cannot get here.

  17. London Calling! (3 Sorry!)
    Living-With-It-In-Hungary: Thanks. How can it be this bad?
    If you are poor and don’t have cross-border options then you die?
    (Message to Orban:
    How can you let this situation prevail? You can pass laws lightningly quick with your private members bill trick; you can spend time in Europe saying how the West will collapse; you can give medals to National shopping chains; you can privatise the fag shops – but your citizens can’t get the medication they need. The so-called ‘professional’ Pharmacists don’t meet their service levels – and just smile and grimace when you tell them how useless they are.
    Here’s a challenge – instead of strutting the world stage like a buffoon– sort our the pharmacies – use a sensible business model. Stop them abusing their monopoly and give all the supermarkets the non-prescription franchise. Do it as lightningly quick as you do for your other one-a-day bills. Pass a bill that will actually benefit your citizens. What about it eh? Victor Nero Orban?)

  18. To Charlie H AND THE REST OF YOU!
    Please listen…
    All this good advice is so much wasted wind.
    Isn’t it time to consider that Orban is ill-willed?
    That an agreement with the EU is the last thing he wants? That he has an interest in creating havoc in the country?
    Let’s show some nimbleness of mind, folks.
    Noone–in his right mind or not–could possibly govern the way Orban has for the last two years and expect to get positive results.
    It’s time to think the unthinkable: WHAT IS HE UP TO?

  19. Meanwhile on Planet Hungary …
    Klubradio has a frequency!! They won a lawsuit against Orban’s “f*k-you-counters”. They won the rights for 92,9MHz just before the elections, then the hastily formed new media council (led by the porn magazine editor) refused to sign the contract with the lame explanation that the radio already was broadcasting on the 95.3Mhz. But according to Péter Bárándy, the lawyer who represented Klubradio, the station made it clear in the bidding process that they will stop broadcasting on the other old frequency once they switch to the new.
    Is something happening to our planet? Are the grofaz’ balls in the pliers?

  20. Keep your eyes on the ball guys
    “”We haven’t yet received an answer from the European Commission but it’s in the air” that the case could go to court, Justice Minister Tibor Navracsics said on public television M1 today.
    Of the three infringement procedures launched against Hungary, the judicial reform stipulating the retirement of judges at the age of 62, is the most contentious, Navracsics said, adding that “this is where the distance between Brussels and Budapest is the biggest.” ”
    If they press the EU on this you can kiss goodbye to the IMF deal. Also, the interest yield curves have started to reflect the non-independence of the central bank. The 4 OV members voting to keep interest rates low with the markets figuring they should be higher but.. the curve is skewed to lower and rises sharply later on to reflect the perceived risk. My interpretation, if and when this goes south, it’s going to go very quickly.

  21. Living with it in Hungary: “Navracsics said, adding that “this is where the distance between Brussels and Budapest is the biggest.” ” If they press the EU on this you can kiss goodbye to the IMF deal.”
    If Népszava’s information is correct, the EU is not going to cave on this issue. You are right, if Orbán refuses to comply the end might come quickly because then there will not be any IMF agreement.

  22. There is another report where one of the MSzP members is saying that OV is betting on a better economy so that the IMF load isn’t needed. The numbers suggest it’s not in the cards. Moody’s has down graded Greece to S (default) which implies markets moving to less risk adverse investments. ‘cept China’s ROI are making Italy’s bond very attractive leaving enough capital on the table to possibly fund Hungary’s needs. no clear answer ‘cept if OV loses the bet, he’ll lose big and the upsides are things will go normally and OV keeps his plan and the EC will need another strategy to bring these guys inline. 😦

  23. Living with Hungary wrote:
    ” and the EC will need another strategy to bring these guys inline. :-(”
    The economic success or failure of Orban’s strategy is legal irrelevant to the question of whether Hungary fulfills its obligations to its treaties with the EU. These obligations existed prior to the new constitution and laws and it had been the duty of Hungary to make its laws in conformity with these treaties. If Hungary now refuses to adjust the constitution and laws, the European Commission has no alternative (that is to say, it is not a matter of politics but of carrying out existing EU law) to initiating penalties, withdrawing payments, perhaps ultimately even suspending or revoking membership.

  24. GW, with these guys it’s simply a case of follow the money. It explains how they reacted in Jan and it will help predicate how they will react in the future. They were out talking to the markets and my previous prediction was, if the HUF falls below 300 that these guys would feel less pressure to make any meaningful changes. We’re below 300 and just go read what they are saying now.. IMHO, it’s a little less conciliatory… yeah??

  25. I know lots of young smoking hipsters or emos, or trendies or whatever, and whenever they want cigarettes they go to whichever is the closest ABC, not to Tesco. I’m sure it is just convenience, but none of them have ever expressed that cigarettes are easier to buy in Tesco or Spar.
    I’m surprised the owners of CBA haven’t got in Lázár’s ear as they will be affected.
    Who knows, maybe with the pharmacy lobby, the pharmacies will start to sell the cigarettes.

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