Nail technicians given competition law warning as they navigate routes to fair pay

On 6 April 2024, it was reported that over 5,000 nail technicians were planning to raise their prices at the same time, on what they dubbed National Nail Price Increase Day.

The initiative, led by online community and training platform The Nail Tech Org, sought to address the fact that many nail technicians earn below minimum wage, with many on £7 per hour.

While the organisers said that not all nail technicians would raise their prices and the amount they raised their prices by would depend on the individual businesses, the initiative raised a red flag with consumer watchdog the Competition and Markets Authority (CMA). It warned nail technicians in an open letter that they may be breaching competition law.

CMA reminder of how businesses must compete  

The CMA letter reminded nail technicians that to comply with the law, they must set their prices independently. Under Chapter 1 of the Competition Act 1998, competitors are not allowed to discuss or coordinate price increases, including the timing or amount of any increase.

The CMA explained the aim of this prohibition is to protect consumer choice and ensure that businesses playing by the rules don’t suffer as a result. The CMA also issued a reminder that breach of competition law can attract serious penalties, including large fines or criminal responsibility for individuals.

Competing policy considerations

This situation highlights that even collaboration with good intentions can mean a breach of competition law. This is not an unfamiliar tension for competition authorities; for example, businesses have previously sought guidance from the CMA on how they can collaborate with competitors on green sustainability initiatives without breaking the law.

There is also clearly a policy concern regarding unfair working conditions for nail technicians in the UK. A few years ago, nail salons were highlighted as an area of high risk for modern slavery. Salons that rely on modern slavery may be able to offer very cheap prices for customers, which other nail technicians need to compete with by bringing their own prices down.

In the context of the recent National Nail Price Increase Day, many nail technicians highlighted that they are not able to cover business costs (especially with rising prices) or pay into their pension when they charge market rates for their services. Many nail technicians enter the profession at a young age and work alone so as a result, may not have had the opportunity to undertake formal training in business management which covers issues like competition law.

However, some of the ‘benefits’ highlighted for nail techs’ from the National Nail Price Increase solution – such as this kind of coordination meaning that nail technicians will act in the same way and not undercut one another on pricing – illustrate the risks posed to consumers by this behaviour.

Competitors coordinating behaviour is not allowed for good reason. It removes the ability of customers to shop around for a better deal and undermines the incentive of businesses to improve their service offering (either through price or quality) in order to attract consumers. Such coordinated approaches can also punish businesses that do follow the law or cause issues for how prices evolve in the long term.

Competition law affects all economic activity

It is often forgotten that smaller entities such as a self-employed sole trader or small business can be considered an ‘undertaking’ (engaged in economic/business activity) for the purpose of a Chapter 1 prohibition. Any collective agreement entered into by anyone engaged in an economic activity could fall foul of competition rules.

In the past, the CMA has not shied away from going after smaller undertakings whose collective arrangements have had a significant impact on the market and therefore consumers. In 2015, the CMA fined a membership organisation of private consultant ophthalmologists for competition law infringements which included circulating detailed price lists amongst its members. The CMA also published an open letter addressed to medical practitioners in general, warning them to act with care not to commit similar abuses.

How to comply with competition law 

The CMA has produced lots of user-friendly guidance for businesses so they can ensure they comply with competition law while developing their businesses. Small business owners should make use of this guidance and check their plans are in line with the law.

There are other ways nail technicians could raise awareness of their fight for fair pay. Salons could advertise that they pay their staff minimum wage as a reason for customers to choose them, and note that this is factored into their prices for treatments.

As consumers are becoming increasingly conscious shoppers on a range of issues, it may be that some customers would be happy to pay more to ensure nail technicians get paid a fair wage. Trade organisations could also run awareness campaigns to highlight ethical issues in the sector in a general way.