You may or may not be aware that Monday 8 April 2024 was assigned the title of ‘National Nail Tech Price Increase Day’. The concept was created by an organisation which provides a learning platform and online community for nail technicians. Media interest saw several news outlets publish articles during the weekend immediately preceding the day, implying that “thousands” of nail technicians would be coming together to collectively raise their prices from Monday 8 April. The intention behind it has since been explained as encouraging nail technicians, many of whom are self-employed proprietors of independent salons, to reflect upon their business costs with a view to ensuring their prices allow them to earn a fair return and reflect the true value of their skills (which may in some cases lead to prices increasing from their previous levels). However, the publicity generated by the initiative was enough to catch the attention of the UK’s competition watchdog.
The Competition and Markets Authority (CMA) swiftly published an open letter to nail technicians on the day itself, reminding businesses in the sector of their obligations under competition law. In particular, the CMA highlighted that businesses must “set their prices independently and that competitors should not discuss or coordinate among themselves the timing or amount of any price increases (whether directly or through a trade body or other membership organisation)”. The CMA pointed out that failure to comply with competition law can lead to a business incurring substantial fines, its directors facing disqualification proceedings and, in the most serious cases, being convicted of a criminal offence.
Trade Associations
This matter has served to highlight the often overlooked risk of illegal anti-competitive behaviour which can result from participation in industry bodies and trade associations. Such organisations exist in a variety of forms and adopt varying degrees of formality, representing virtually every industry sector at a local, regional or national level. Membership can offer businesses and their management an invaluable means of keeping abreast of industry developments and best practice and can provide a vital source of support and advice. However, the bringing together of representatives from businesses in the same sector, who are often actual or potential competitors, is fraught with the risk that illegal anticompetitive behaviour could be facilitated or encouraged, either intentionally or inadvertently. In recent years the CMA has raised concerns and taken enforcement action, including substantial fines, against trade associations, their members and other related parties, for reasons including:
- trade association rules which serve to unfairly protect certain members and/or close off a portion of the market to non-members;
- sharing (and facilitating the sharing) of confidential and commercially sensitive information between competing businesses;
- detailed price lists set by a trade association to be applied by its members; and
- an agreement which prohibited the advertisement of members’ prices and special offers in a local newspaper, which was subsequently extended by arrangement with the newspaper publisher to cover non-members in the same industry.
Tips for staying on the right side of competition law
It is critically important that members of an industry body or trade association are not required to supply it with commercially sensitive information, which might include matters such as future pricing and output strategies or how they plan to react to changes in the market; and that they are not encouraged or permitted to share such information with fellow members. Whilst trade associations will inevitably want to protect their members’ interests, they should not try to set pricing or output recommendations for their members, nor seek to direct or influence negotiations between members and their customers. Rules which place restrictions on members’ advertising or marketing activities should also be avoided and, ideally, the association should put in place a competition compliance policy, which its members must adhere to.
If you attend meetings or have conversations with industry peers and rivals (either in person or online), it is critically important that you do not get drawn into sharing commercially sensitive information or agreeing to work together in a way which creates an unfair advantage. When working out where to draw the line, it is helpful to keep in mind that competition law does not prohibit membership of trade bodies, nor does it prevent friendly rivalry or discussion between competitors. However, it does require that any decisions about matters such as the geographic areas you target, where and how you advertise, which customers you approach or take on, your pricing strategy, discounts and promotions and your planned production or output levels, must all be taken independently and not based on co-ordination with rivals, either directly or through an arrangement facilitated by a trade association.
For more information on competition law and how our specialist associate Joe McMahon and our Commercial team, click here.