By  on September 26, 2017
Luxottica makes eyewear for brands like Chanel (pictured) but its tie-up with lens-maker Essilor is coming under government scrutiny.

Luxottica Group’s proposed 46 billion euro merger with Essilor has raised some red flags with European antitrust authorities.The European Commission launched a formal investigation into the deal between Italian Luxottica, which makes fashion eyewear for a range of high-end licensees, and French lens maker Essilor, based on concerns that it would reduce competition for ophthalmic lenses.Competition commissioner Margrethe Vestager said the “in-depth investigation” will “assess whether the proposed merger would lead to higher prices or reduced choices for opticians and ultimately consumers.”“Half of Europeans and almost all of us will need vision correction one day,” she added.The commission noted the Luxottica is currently the largest supplier of eyewear in Europe and the world, while Essilor is the largest supplier of lenses, and both companies sell their products to opticians, who then sell to the public.The preliminary investigation has already “raised several issues,” the commission said, leading to a concern that the new LuxotticaEssilor may use bundling to get opticians to only purchase its lenses. This could lead to increased prices through the exclusion of current and emerging rival suppliers.Although Luxottica and Essilor revealed the tie-up early this year, the commission only received formal notification in August. A final decision on the merger is expected by Feb. 12.In a joint statement, Luxottica and Essilor said the investigation was “expected given the size of the parties,” but they are still planning on a close of the transaction “around the end of the year.”“Both parties are confident that phase two 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 companies said. The investigation is likely to cause some complications, however, as Luxottica executives in March said the integration of Essilor had already begun and was “on schedule” while discussing the company’s annual financials.Paolo Alberti, Luxottica’s president of wholesale, noted at the time that the merger would be beneficial to wholesalers. Referring to Luxottica customers who are currently supplied by Essilor, Alberti said: “They will have to buy less stock from us, because stock will be where the lenses are.”Massimo Vian, Luxottica’s head of operations, also spoke to the bigger opportunity for growth through the merger based on the expectation that demand for frames is expected to grow by 19 percent by 2021 and 17 percent for prescription lenses.“As a combined entity we would strengthen our offer for eye care professionals and consumers, coupling brand management with eye care, a crucial pillar in our model to achieve vertical integration,” Vian said at the time. The merger is expected to create a eyewear powerhouse with annual sales of 16 billion euros.For More, See:Luxottica Sales Rise as Group Reshapes U.S. Retail PortfolioAccessories Sparkle in MilanTiffany & Co. Appoints Roger Farah as Chairman

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