Single market is not single, and it’s costing us all

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The EU’s internal market is still falling short of its founding promise. Despite decades of integration, consumers across member states face uneven product quality and varied prices. This is due to regulatory fragmentation in two main forms: Territorial Supply Constraints and gold-plating. TSCs occur when suppliers block cross-border sourcing to preserve price differences. Gold-plating happens when national governments add rules to EU law, raising regulatory burdens and creating trade barriers. The result is higher operational costs for businesses, which are then passed on to consumers.

A Slovak supermarket chain tries to buy shampoo from Romania only to be told: “You must pay Slovak prices.” This restriction, known as a Territorial Supply Constraint (TSC), is just one way the EU single market is falling short of its promise. An issue gaining renewed urgency amid the growing trade tensions between the EU and the US, TSCs are legal grey zones that manufacturers use to fragment the EU market, restricting cross-border sourcing and inflating prices, especially in CEE.

Some 49% of retailers and wholesalers said they had tried to source goods from another EU country but were refused due to geographical location, according to a 2020 DG GROW study. Meanwhile, 77% of suppliers admitted to tailoring offers based on the country, the report added.

TSCs are not imposed by governments, but by companies, in effect exploiting lingering national barriers that fragment the EU single market. These constraints stymie cross-border efficiency, competition and price convergence. Addressing them would require firm regulatory intervention at both the national and EU levels.

European Commission (EC) President Ursula von der Leyen recently called eliminating internal market barriers a top priority, especially as global trade risks increase. Citing an IMF study, she underlined that the EU’s internal market barriers equate to a 45% tariff on manufacturing and a 100% tariff on services. “This simply cannot be, this must change – now,” von der Leyen said.

This regulatory burden is massive. Stoiber Group research estimated the EU’s annual administrative costs at EUR 150bn, or 1.3% of GDP: with the true cost, including unharmonised standards and duplicated procedures, around EUR 200bn.

CEE hit harder by TSCs

TSCs disproportionately affect CEE countries, whose economies generally have lower consumer purchasing power, making higher prices even more burdensome. “With thin margins and price-sensitive consumers, retailers cannot absorb inflated wholesale costs, so prices rise.”

Evidence from EC investigations, particularly the 2024 Mondelez case, illustrates the impact of TSCs on CEE. That investigation revealed that Mondelez had deliberately restricted the supply of products from lower-cost markets such as Germany to higher-priced countries including Romania, Bulgaria and Slovakia. These practices were found to distort intra-EU trade by obstructing parallel imports and artificially splitting markets, harming consumers in less affluent member states in particular.

Further exacerbating the issue, CEE countries often have unique packaging, labelling, waste management and language rules, creating legal and logistical obstacles for cross-border sourcing. These compounding factors make parallel trade more difficult and more expensive in the very regions that would benefit most.

Regulatory chaos: gold-plating comes at a cost

Whilst in theory the EU harmonises product standards across the single market, in practice, companies still face duplicative compliance burdens.

This phenomenon of gold-plating occurs when member states add national rules that go beyond EU legislation, imposing unnecessary regulatory costs. These may be the result of over-cautious implementation or political motives, and result in a dual regulatory regime that confuses and burdens businesses. For example, food products legally sold in one country may be blocked in another due to national rules on additives or nutritional claims.

This “dual-quality controversy” shone a light on food inconsistency: a JRC study found that up to 31% of branded items with identical packaging had different compositions across member states. Similarly, construction products that meet EU fire safety standards in Sweden may require retesting in Hungary or Poland. The EU’s Construction Products Regulation of 2011 is frequently undercut by national requirements, forcing producers to navigate parallel documentation systems.

Contrastingly, the US operates with unified federal product standards. For instance, the US Food and Drug Administration sets consistent rules on food safety and labelling nationwide. States, in most cases, cannot block or tax products from other states, as this would violate the Commerce Clause of the US. Constitution. As a result, distributors can source freely across the country, and consumers face largely uniform prices, with some exceptions such as alcohol and tobacco, which are subject to varying excise duties across US states, despite overall regulatory uniformity.

Exhaustive EU report uncovers inconsistencies

The Draghi report, a wide-ranging 2024 study of European competitiveness, identified waste and packaging rules as among the top three sources of regulatory costs for businesses. A review of EU legislation found 169 duplicative requirements: 29% with significant variations and 11% with actual inconsistencies.

CEE countries operate divergent national systems: for example, Hungary has a centralised system of extended producer responsibility managed by a single contractor, while Slovakia and Romania have separate, less integrated frameworks. Firms operating across these borders must tailor waste strategies country by country, increasing compliance costs.

Despite streamlining schemes such as the One Stop Shop (OSS) and Import OSS, VAT compliance continues to be a burden, as businesses in the EU face varied thresholds, formats and national reporting systems. A European Parliament study estimated the average tax compliance cost in the EU as EUR 15,000 per company per year, with costs averaging at 1-2% of turnover and even higher for small firms. CEE countries such as Hungary, Slovakia and Czechia benefit from lower average compliance costs, but the overall burden remains significant.

Gold-plating extends into the financial sector. The Basel framework, an international standard for banking regulation, has been implemented more stringently in the EU than in the US. While the US has delayed the application of some parts of Basel III, the EU’s more stringent regulatory stance has increased compliance burdens for European banks. Compounded by the lack of a universal banking union, this fragmentation discourages cross-border operations and hampers EU banks’ ability to scale.

The Path Forward

Non-tariff barriers are undermining the fundamental promise of the EU single market: equal access and fair pricing for all Europeans. While legal barriers may have diminished, economic distortions persist, especially in CEE.

Dismantling many of these barriers does not require treaty change: the EC is already pursuing solutions: harmonised digital reporting, streamlining existing rules and preventing gold-plating through clearer transposition guidelines.

Von der Leyen has tasked the EC’s executive vice-president with delivering bold reforms to remove these internal obstacles. If successful, this could mark a renewed commitment to the single market’s original vision: a space where goods, services, capital, and people move freely, in practice, as well as in theory.

For CEE, this is more than a competitiveness agenda. It’s a question of fairness, economic inclusion and the realisation of the full promise of European integration.