European Commission Opens In-Depth Probe of Proposed Essilor and Luxottica Merger

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BRUSSELS—The European Commission announced today that it has opened an in-depth investigation to assess the proposed merger between Essilor and Luxottica under the EU Merger Regulation. The Commission released a statement saying it has concerns that the merger may reduce competition for ophthalmic lenses, and will further investigate effects on eyewear.

“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," said EU commissioner Margrethe Vestager, who is in charge of competition policy.

The Commission's said its initial market investigation raised several issues relating in particular to the combination of Essilor's strong market position in lenses and Luxottica's strong market position in eyewear.

As it embarks on Phase 2 of its investigation, the Commission said it is concerned 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.”

In addition, the Commission said it will further assess whether the merged entity would use Essilor's strength in ophthalmic lenses to exclude rival eyewear suppliers from the markets, and if the merger would remove important emerging competition from Luxottica in lenses and from Essilor in eyewear.

In response to the EU’s move, Essilor and Luxottica issued a joint statement saying they are “confident that Phase II will be completed in a timely manner and will closely cooperate with the European Commission to fully demonstrate the rationale of the proposed combination and the benefits that it will bring to customers, consumers and all the eyewear industry players.”

The two companies said they reaffirm their objective to close the transaction around the end of the year, in cooperation with the relevant authorities. The transaction has been unconditionally cleared so far in Russia, India, Colombia, Japan, Morocco, New Zealand, South Africa and South Korea.

As announced on Jan.16, 2017,  Essilor and Delfin, the majority shareholder of Luxottica Group, signed an agreement designed to create an integrated global player in the eyewear industry with the combination of Essilor and Luxottica.

The Commission was notified of the proposed merger on Aug.22, 2017. It now has 90 working days, until Feb. 12, 2018, to make a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation, the Commission noted. All decisions and procedural conduct of the Commission are subject to review by the EU’s General Court and ultimately by the Court of Justice. The companies or other parties demonstrating an interest can appeal within two months of the decision.