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After almost six months of investigation, the European Commission (EC) has authorized in phase two, although without commitments, the merger or concentration between Essilor and Luxottica, considering that the merger does not significantly impede effective competition. The decision’s wording is not yet public, but you can access the EC’s press release here.

The merger is between two leading companies in the optical industry. Essilor is the largest supplier of ophthalmic lenses, both worldwide and in Europe (well-known brands such as Varilux and Transitions), and it supplies optical equipment and instruments. The largest supplier of frames and sunglasses, Luxottica also has well-known brands in its portfolio such as Ray-Ban, Oakley and Persol, and it distributes other luxury brands under license.

The EC started phase two to investigate the merger in detail, fearing the possible exclusion from the market of lens suppliers based on the two companies’ strong presence and the resulting combination of two leading brands. Since September 2017, the EC has been analyzing the possible risks of this merger in an investigation that, given the worldwide scope of the parties’ activities, it carried out in parallel and coordination with competition authorities from different countries, including Brazil, the US, South Africa and Turkey.

The EC was initially concerned that the combination of the two businesses could lead to the exclusion of competitors from the market through practices such as bundling or tying of the parties’ clearly complementary products. This would ultimately lead to a reduced offer of products for product buyers and for end consumers, as well as increased prices.

However, based on the results of its market investigation, in which 4,000 opticians and ophthalmologists participated, the EC concluded that:

 

  • Luxottica’s brands in frames and sunglasses are not essential products. Proof of this is Luxottica’s market share in Europe (less than 20%) and that many opticians do not sell its products.
  • The merged company would not be able to exclude (i) competing eyewear manufacturers, as Essilor has insufficient market power and incentives to shut out Luxottica’s competitors; and (ii) other competing lens manufacturers (generally sunglasses are sold without visual correction, meaning that Luxottica would not have market power).
  • There are no incentives to engage in bundling and tying because of the risk of losing customers. Also, even if it engaged in these practices, this would be unlikely to significantly affect competing suppliers of lenses.

 

Based on the above, and despite the initial competition concerns about the transaction, the EC authorized the transaction in phase two without the companies having to present or take on commitments. This is not standard EC practice: of about 20 transactions for which the EC has started phase-two investigations in the last two years, excluding this case and the case of TNT/FEDEX, it denied authorization or made authorization subject to commitments.

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