Luxottica, the world’s largest manufacturer of eyeglass frames, has recently merged with Essilor, the world’s largest producer of lenses. While the companies will no doubt reap major dividends from the $50 billion dollar deal, this kind of merger is bad news for brands — and even worse news for consumers.

Here’s some background. Based in France, Essilor controls a whopping 45 percent of the global market share for lenses. They also own the direct-to-consumer e-commerce sites Coastal.com, EyeBuyDirect and FramesDirect.

Italy’s Luxottica, meanwhile, has cornered a 14 percent global market share on frames, owning brands like Persol, Oakley, Oliver Peoples, Ray-Ban and major distribution like Sunglass Hut, LensCrafters, Pearle Vision and Sears Optical. They also hold licensing rights to some of the most sought-after luxury eyewear brands, including Prada, Ralph Lauren, Versace and Coach. They’re the ones who actually manufactured your Chanel glasses — not Chanel.

The math behind the deal is simple: combine the industry’s leading source of lenses with the leading source of frames, and you get the leading source of eyewear in the world. It should make analysts swoon. By supplying the two main elements of the final product, Luxottica/Essilor will essentially control the entire supply chain in the eyewear market. This will also likely give them leverage over the booming global eyewear market, which is expected to reach a value of $130 billion by the end of 2018.

As I said — great news for that one Goliath, bad news for almost everyone else. Why? Well, let’s start with design. With increased control over the global eyewear licensing market, Luxottica will inevitably edge out some of its current, smaller competitors. For brands, this means access to fewer licensing partners, which means fewer distinct design directions to offer brands. The market will thus be flooded with a limited range of generic designs from one company posing as multiple companies (e.g. more “options” in LensCrafters that aren’t really options).

Besides the aesthetic drawback, the smaller selection of licensors in the market (as the new company pushes out smaller partners) will also mean brands will have no control over pricing. It’s simple economics: fewer suppliers mean higher prices. In addition, the loss of optionality increases the monopoly company’s leverage and allows them to compress the royalties they pay to the brand. When you’re the only game in town, it’s very easy to get deal terms exactly the way you want them.

In addition, this resulting decline in royalty dollars will put a damper on innovation for the brands and a damper on brand awareness that new accessory lines generate. While limited competition gives licensing partners greater leverage over all brands, it allows them to really flex their bargaining muscle with the less established ones — the type of hungry outsiders who tend to fuel innovation.

When marketplaces shrink, there are fewer options for brands and therefore fewer options for customers. That means higher prices and lower quality as the final product. After all, why would Luxottica/Essilor design high-quality products when they have no competition? It won’t be long before most major-brand eyewear starts to look more and more alike and get more and more expensive with (best case scenario) the same level of quality.

Understanding the ramifications of the Luxottica/Essilor merger is critical. Eyewear remains one of the most important licensing growth drivers for fashion brands and that opportunity could go away quickly with this merger. As the one accessory that people wear almost every single day, eyeglasses offer a powerful and personal consumer touchpoint, while their small size makes them easy and affordable to ship. More than 60 percent of Americans currently wear glasses – and with increased education rates and longer life expectancies, we can only expect the demand for prescription eyewear to grow. Luxottica/Essilor is positioning themselves to block out the rest of the business world from that growth and keep it for themselves and their shareholders.

Brands that are considering entering the eyewear and sunwear market may want to get into it before this new megacompany has a chance to lock down the entire market. Before you take the jump, think about the following when looking for a licensing partner:

  • Brand Integrity: From product design to in-store experience, ensure that you have input in all key decisions so that every element is tailored to your customers and your brand. Look for a partner who will be a collaborator instead of one with whom you have little brand control.
  • Distribution: Lean on digital and direct distribution in order to ensure the best brand experience. If you control the brand identity online and in stores, it is less likely to get diluted. A good licensing partner will make eyewear a seamless integration with your core products season after season.
  • Growth: Direct distribution means substantial royalties and marketing dollars. Avoid partners that offer low royalties and high up-front fees.

In a new landscape dominated by the Luxottica/Essilor behemoth, expanding brands that move smartly (and quickly) into eyewear using these guiding principles will give the industry the brightest of silver linings and continue to promote diversity in the eyewear market. Contemporary brands with bold, fresh offerings and ideas will thrive, while consumers will enjoy a wealth of exciting design options at excellent price points.

Andrew Lipovsky is founder and chief executive officer of Eponym.

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