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Essilor and Luxottica Merger Unopposed by ACCC

mivision | 26 October 2017
The Australian Competition and Consumer Commission (ACCC) will not oppose the proposed merger between Essilor International (Essilor) and Luxottica Group S.p.A. (Luxottica), having determined that in Australia “there is minimal direct competitive overlap between the two parties”.

While Essilor predominantly sells wholesale finished ophthalmic lenses used to correct visual impairments in Australia, Luxottica’s main business here is to supply wholesale prescription frames and sunglasses.

“As Essilor and Luxottica mostly supply products at different stages of the supply chain, there is minimal direct competitive overlap between the two parties,” said Roger Featherston, ACCC Commissioner.

“The ACCC focussed on the increased vertical integration, and whether the combined company having operations in all parts of the optical supply chain would give rise to a substantial lessening of competition.

“While Luxottica does supply market leading branded frames and sunglasses, retailers have generally indicated that there are alternative suppliers of frames and sunglasses that they could switch to if they did not wish to purchase from the combined Essilor-Luxottica. There are also other options for lenses.”

Mixed Feedback

Mr. Featherstone said the ACCC had spoken to a range of interested parties including customers, competitors, buying groups and industry associations. “The feedback from market participants was mixed, with some expressing concern while others expressed no concerns about the proposed merger,” he said.   

The ACCC also considered whether the combined Essilor-Luxottica could tie or bundle its supply of frames and lenses to independent retailers to the detriment of competition. It concluded that any attempt to bundle the supply of these brands with the supply of lenses would be unlikely to substantially lessen competition.

“The ACCC’s investigation found that a merged Essilor-Luxottica would likely continue to face competition at every level of the supply chain, including from other vertically integrated suppliers,” Mr. Featherston said.   

European Commission Decision Awaited

The European Commission opened an in-depth investigation to assess the proposed merger under the EU Merger Regulation in late September. The Commission's initial market investigation raised several issues, primarily regarding the strong market position Essilor has in lenses and Luxottica has in eyewear.

In a Statement, the Commission expressed concern that, “following the transaction, the merged entity may use Luxottica's powerful brands to convince opticians to buy Essilor lenses and exclude other lens suppliers from the markets, through practices such as bundling or tying. The Commission will investigate whether such conduct could lead to adverse effects on competition, such as limiting purchase choices or increasing prices.”

The Commission is also examining whether:
• “the merged entity would use Essilor's strength in ophthalmic lenses to exclude rival eyewear suppliers from the markets,
• the merger would remove important emerging competition from Luxottica in lenses and from Essilor in eyewear.”

Margrethe Vestager, in charge of competition policy, said: “Half of Europeans wear glasses and almost all of us will need vision correction one day. Therefore we need to carefully assess whether the proposed merger would lead to higher prices or reduced choices for opticians and ultimately consumers”.

A decision from the European Commission is to be made on 12 February 2018.

' The ACCC… concluded that any attempt to bundle the supply of these brands with the supply of lenses would be unlikely to substantially lessen competition '