# C_2018335EN.01001001.xml

| 20.9.2018 | EN | Official Journal of the European Union | C 335/10 |
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20.9.2018

EN

Official Journal of the European Union

C 335/10

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Summary of Commission Decision

of 1 March 2018

declaring a concentration compatible with the internal market and the functioning of the EEA Agreement

(Case M.8394 — Essilor/Luxottica)

(notified under document C(2018) 1198 final)

(Only the English version is authentic)

(Text with EEA relevance)

(2018/C 335/08)

On 1 March 2018 the Commission adopted a Decision in a merger case under Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) (1)
  , and in particular Article 8(1) of that Regulation. A non-confidential version of the full Decision, as the case may be in the form of a provisional version, can be found in the authentic language of the case on the website of the Directorate-General for Competition, at the following address: http://ec.europa.eu/comm/competition/index_en.html

(1)

The attached decision declares the merger between Essilor International (Compagnie Générale d'Optique) SA (‘Essilor’, France) and Luxottica Group SpA (‘Luxottica’, Italy) to be compatible with the internal market and the EEA Agreement, in accordance with Articles 2(2) and Article 8(1) of the Merger Regulation and Article 57 of the EEA Agreement.

(2)

On 22 August 2017, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (‘the Merger Regulation’) by which the undertakings Essilor and Luxottica enter into a full merger within the meaning of Article 3(1)(a) of the Merger Regulation (‘the Transaction’). Essilor and Luxottica are together referred to as ‘the Parties’. The company resulting from the merger is referred to as ‘the Merged Entity’.

I.   THE PARTIES AND THE TRANSACTION

THE PARTIES AND THE TRANSACTION

| (3) | The Transaction concerns the full merger of Essilor and Luxottica. On 15 January 2017, Luxottica's controlling shareholder, Delfin, and Essilor entered into a Combination Agreement. As a result of the Transaction's implementation Essilor will become a pure holding company with the new name ‘EssilorLuxottica’ (HoldCo) controlling two subsidiaries: (i) Luxottica; and (ii) New Essilor resulting from a hive-down of Essilor's operating activities. |
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(3)

The Transaction concerns the full merger of Essilor and Luxottica. On 15 January 2017, Luxottica's controlling shareholder, Delfin, and Essilor entered into a Combination Agreement. As a result of the Transaction's implementation Essilor will become a pure holding company with the new name ‘EssilorLuxottica’ (HoldCo) controlling two subsidiaries: (i) Luxottica; and (ii) New Essilor resulting from a hive-down of Essilor's operating activities.

| (4) | Essilor is a company headquartered in France which is mainly active in the manufacture and wholesale distribution of ophthalmic lenses. It also manufactures optical instruments, machines and consumables for eye-care professionals and lens manufacturers. Essilor is also active to a lesser extent in the manufacture and sale of eyewear and in online retail sales. In 2016, Essilor generated sales of approximately EUR 7 billion. |
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(4)

Essilor is a company headquartered in France which is mainly active in the manufacture and wholesale distribution of ophthalmic lenses. It also manufactures optical instruments, machines and consumables for eye-care professionals and lens manufacturers. Essilor is also active to a lesser extent in the manufacture and sale of eyewear and in online retail sales. In 2016, Essilor generated sales of approximately EUR 7 billion.

| (5) | Luxottica is a company headquartered in Italy, which designs, manufactures and distributes prescription frames and sunglasses marketed under a portfolio of both proprietary and licensed brands. It is also active in optical retail, but only to a limited extent in Europe, and in the wholesale of lenses following the recent opening of a laboratory in Italy. In 2016, Luxottica generated sales of approximately EUR 9 billion. |
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(5)

Luxottica is a company headquartered in Italy, which designs, manufactures and distributes prescription frames and sunglasses marketed under a portfolio of both proprietary and licensed brands. It is also active in optical retail, but only to a limited extent in Europe, and in the wholesale of lenses following the recent opening of a laboratory in Italy. In 2016, Luxottica generated sales of approximately EUR 9 billion.

II.   EU DIMENSION

EU DIMENSION

| (6) | The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million (2). Each of them has an EU-wide turnover in excess of EUR 250 million, but they do not achieve more than two thirds of their aggregate EU-wide turnover within one and the same Member State. |
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(6)

The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5 000 million (2

III.   THE PROCEDURE

THE PROCEDURE

| (7) | Based on its market investigation, the Commission raised serious doubts as to the compatibility of the Transaction with the internal market and adopted a Decision to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation on 26 September 2017. |
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(7)

Based on its market investigation, the Commission raised serious doubts as to the compatibility of the Transaction with the internal market and adopted a Decision to initiate proceedings pursuant to Article 6(1)(c) of the Merger Regulation on 26 September 2017.

| (8) | On 17 October 2017, the Parties requested an extension of the legal deadline by ten working days pursuant to Article 10(3) second subparagraph, first sentence of the Merger Regulation. |
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(8)

On 17 October 2017, the Parties requested an extension of the legal deadline by ten working days pursuant to Article 10(3) second subparagraph, first sentence of the Merger Regulation.

| (9) | On 19 October 2017, the Commission adopted a decision pursuant to Article 11(3) requiring Essilor to supply information responsive to a request for information by the Commission. |
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(9)

On 19 October 2017, the Commission adopted a decision pursuant to Article 11(3) requiring Essilor to supply information responsive to a request for information by the Commission.

| (10) | On 31 October 2017, the Commission adopted a decision pursuant to Articles 10(4) and 11(3) of the Merger Regulation requiring Luxottica to supply documents responsive to a request for information by the Commission. The merger review limit was suspended from 25 October 2017 until 7 November 2017. |
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(10)

On 31 October 2017, the Commission adopted a decision pursuant to Articles 10(4) and 11(3) of the Merger Regulation requiring Luxottica to supply documents responsive to a request for information by the Commission. The merger review limit was suspended from 25 October 2017 until 7 November 2017.

| (11) | On 21 December 2017, the Commission, with the agreement of the Parties, extended the time limit of the proceedings by ten working days until 22 March 2018 pursuant to Article 10(3) of the Merger Regulation, in order to allow it to assess a late submission of documents previously omitted by the Parties. |
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(11)

On 21 December 2017, the Commission, with the agreement of the Parties, extended the time limit of the proceedings by ten working days until 22 March 2018 pursuant to Article 10(3) of the Merger Regulation, in order to allow it to assess a late submission of documents previously omitted by the Parties.

IV.   ASSESSMENT

ASSESSMENT

| (12) | The Transaction concerns the optical value chain in the EEA. The relevant product and geographic markets are defined as follows: |
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(12)

The Transaction concerns the optical value chain in the EEA. The relevant product and geographic markets are defined as follows:

1.   Relevant market definitions

Relevant market definitions

1.1.   Ophthalmic substrate

Ophthalmic substrate

| (13) | The Commission considers that the market for ophthalmic substrate, an input for the production of made-to-order ophthalmic lenses, is separate from the market for ophthalmic lenses as there is neither demand-side nor supply-side substitutability between lenses and substrate. In line with its precedents the Commission considers that the market for ophthalmic substrate is at least EEA-wide in scope. |
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(13)

The Commission considers that the market for ophthalmic substrate, an input for the production of made-to-order ophthalmic lenses, is separate from the market for ophthalmic lenses as there is neither demand-side nor supply-side substitutability between lenses and substrate. In line with its precedents the Commission considers that the market for ophthalmic substrate is at least EEA-wide in scope.

1.2.   Wholesale supply of ophthalmic lenses

Wholesale supply of ophthalmic lenses

| (14) | The Commission considers that the relevant market is the market for the wholesale of finished ophthalmic lenses, including both clear and sunglass lenses. The investigation confirmed the relevance of potential segmentations by material, prescription design, and sales channel. However, such segmentations would not have any impact on the competitive assessment and can therefore be left open. The investigation confirmed further that the geographic market for the wholesale of ophthalmic lenses is national. |
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(14)

The Commission considers that the relevant market is the market for the wholesale of finished ophthalmic lenses, including both clear and sunglass lenses. The investigation confirmed the relevance of potential segmentations by material, prescription design, and sales channel. However, such segmentations would not have any impact on the competitive assessment and can therefore be left open. The investigation confirmed further that the geographic market for the wholesale of ophthalmic lenses is national.

1.3.   Wholesale supply of frames

Wholesale supply of frames

| (15) | The Commission takes the view that the market for the wholesale of frames is separate from the market for the wholesale of sunglasses as there is no demand-side substitutability between the products. While there may be some supply-side substitutability, suppliers tend to have different strengths in either frames or sunglasses. |
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(15)

The Commission takes the view that the market for the wholesale of frames is separate from the market for the wholesale of sunglasses as there is no demand-side substitutability between the products. While there may be some supply-side substitutability, suppliers tend to have different strengths in either frames or sunglasses.

| (16) | The Commission considers that the relevant market is the market for the wholesale supply of frames. Further sub-segmentation by price point, branding or sales channel would not have an impact on the competitive assessment and can therefore be left open. The geographic market definition for the wholesale of frames could be national or EEA-wide and can ultimately be left open. |
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(16)

The Commission considers that the relevant market is the market for the wholesale supply of frames. Further sub-segmentation by price point, branding or sales channel would not have an impact on the competitive assessment and can therefore be left open. The geographic market definition for the wholesale of frames could be national or EEA-wide and can ultimately be left open.

1.4.   Wholesale supply of sunglasses

Wholesale supply of sunglasses

| (17) | The Commission considers that the relevant market is the market for the wholesale supply of sunglasses. Further sub-segmentation by price point, branding or sales channel would not have an impact on the competitive assessment and can therefore be left open. The geographic market definition for the wholesale of sunglasses could be national or EEA-wide and can ultimately be left open. |
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(17)

The Commission considers that the relevant market is the market for the wholesale supply of sunglasses. Further sub-segmentation by price point, branding or sales channel would not have an impact on the competitive assessment and can therefore be left open. The geographic market definition for the wholesale of sunglasses could be national or EEA-wide and can ultimately be left open.

1.5.   Ophthalmic machines and consumables

Ophthalmic machines and consumables

| (18) | The Commission leaves open whether the market of ophthalmic machines should be further split between surfacing machines, coating machines, industrial glazing machines and commercial glazing machines (‘table-top edgers’) as the Transaction does not raise competition concerns in any of those markets. The Commission considers the market for ophthalmic machines and specifically commercial glazing machines (table-top edgers) to be at least EEA-wide in scope and leaves the precise market delineation open as it would not have an impact on the competitive assessment. |
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(18)

The Commission leaves open whether the market of ophthalmic machines should be further split between surfacing machines, coating machines, industrial glazing machines and commercial glazing machines (‘table-top edgers’) as the Transaction does not raise competition concerns in any of those markets. The Commission considers the market for ophthalmic machines and specifically commercial glazing machines (table-top edgers) to be at least EEA-wide in scope and leaves the precise market delineation open as it would not have an impact on the competitive assessment.

| (19) | The Commission leaves open the definition of the relevant product market for consumables considering that the transaction hardly affects this market. The geographic market is at least EEA-wide in scope. |
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(19)

The Commission leaves open the definition of the relevant product market for consumables considering that the transaction hardly affects this market. The geographic market is at least EEA-wide in scope.

1.6.   Optical retail

Optical retail

| (20) | The Commission leaves open whether the market for optical retail should be further segmented between brick-and-mortar and online sales as such segmentation would not have any impact on the competitive assessment. The Commission considers the markets for optical retail to be national in view of past practice and the results of the market investigation. |
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(20)

The Commission leaves open whether the market for optical retail should be further segmented between brick-and-mortar and online sales as such segmentation would not have any impact on the competitive assessment. The Commission considers the markets for optical retail to be national in view of past practice and the results of the market investigation.

1.7.   Contact lenses

Contact lenses

| (21) | The Commission considers that the potential distinction between soft and hard lenses can be left open in this case as it would not have any impact on the outcome of the assessment. The Commission considers contact lens markets to be either national or EEA-wide in scope but that the geographic market definition can be left open since it does not have any impact on the competitive assessment. |
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(21)

The Commission considers that the potential distinction between soft and hard lenses can be left open in this case as it would not have any impact on the outcome of the assessment. The Commission considers contact lens markets to be either national or EEA-wide in scope but that the geographic market definition can be left open since it does not have any impact on the competitive assessment.

2.   Competitive assessment

Competitive assessment

2.1.   Assessment of horizontal non-coordinated effects

Assessment of horizontal non-coordinated effects

2.1.1.   Wholesale of ophthalmic lenses

Wholesale of ophthalmic lenses

| (22) | The Commission found that in 2016, Luxottica entered the European market for ophthalmic lenses by opening a laboratory in Italy (Sedico). |
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(22)

The Commission found that in 2016, Luxottica entered the European market for ophthalmic lenses by opening a laboratory in Italy (Sedico).

| (23) | The market investigation showed that a large majority of respondents do not see Luxottica as a meaningful player in lenses in coming years. |
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(23)

The market investigation showed that a large majority of respondents do not see Luxottica as a meaningful player in lenses in coming years.

| (24) | Furthermore, rivals Hoya, Zeiss and Rodenstock appear to be better placed than Luxottica would have been to exert competitive pressure on Essilor. This is complemented by local competitors in a number of EEA countries and by competition from Asian suppliers for lower-value products. |
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(24)

Furthermore, rivals Hoya, Zeiss and Rodenstock appear to be better placed than Luxottica would have been to exert competitive pressure on Essilor. This is complemented by local competitors in a number of EEA countries and by competition from Asian suppliers for lower-value products.

| (25) | The Commission therefore takes the view that despite Luxottica's recent entry into the ophthalmic lenses markets in Europe, the Transaction will not significantly impede effective competition as a result of horizontal non-coordinated effects in markets for ophthalmic lenses in any EEA country, in particular the UK and Italy. |
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(25)

The Commission therefore takes the view that despite Luxottica's recent entry into the ophthalmic lenses markets in Europe, the Transaction will not significantly impede effective competition as a result of horizontal non-coordinated effects in markets for ophthalmic lenses in any EEA country, in particular the UK and Italy.

2.1.2.   Wholesale of prescription frames and sunglasses

Wholesale of prescription frames and sunglasses

| (26) | Essilor has been developing its frames and sunglasses business in the EEA in recent years. However, the Commission found Luxottica's and Essilor's brands to be distant competitors in prescription frames as Essilor's brands are positioned at lower price points, with Bolon and Costa as the only exceptions. Essilor acquired US-based Costa in 2014 and Chinese-based Bolon in 2013, [...]. Both brands were launched in the European market in 2016 and are currently being rolled out in several EU countries. |
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(26)

Essilor has been developing its frames and sunglasses business in the EEA in recent years. However, the Commission found Luxottica's and Essilor's brands to be distant competitors in prescription frames as Essilor's brands are positioned at lower price points, with Bolon and Costa as the only exceptions. Essilor acquired US-based Costa in 2014 and Chinese-based Bolon in 2013, [...]. Both brands were launched in the European market in 2016 and are currently being rolled out in several EU countries.

| (27) | However, Costa and Bolon [...] if the company had achieved its sales objectives for its top eyewear brands by 2020, it would represent only about 2 % of the EEA branded eyewear market. |
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(27)

However, Costa and Bolon [...] if the company had achieved its sales objectives for its top eyewear brands by 2020, it would represent only about 2 % of the EEA branded eyewear market.

| (28) | The market investigation showed that a large majority of respondents do not see Essilor as a meaningful player in frames or sunglasses in coming years. |
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(28)

The market investigation showed that a large majority of respondents do not see Essilor as a meaningful player in frames or sunglasses in coming years.

| (29) | Furthermore, the merged entity will continue to face competition from other frames and sunglasses suppliers, offering a wide variety of brands, including Safilo and De Rigo among others. |
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(29)

Furthermore, the merged entity will continue to face competition from other frames and sunglasses suppliers, offering a wide variety of brands, including Safilo and De Rigo among others.

| (30) | The Commission therefore takes the view that despite Essilor's recent launch of new eyewear brands such as Bolon and Costa in the EEA, the Transaction will not significantly impede effective competition as a result of horizontal non-coordinated effects in markets for prescription frames or in markets for sunglasses in the EEA as a whole or in any EEA country. |
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(30)

The Commission therefore takes the view that despite Essilor's recent launch of new eyewear brands such as Bolon and Costa in the EEA, the Transaction will not significantly impede effective competition as a result of horizontal non-coordinated effects in markets for prescription frames or in markets for sunglasses in the EEA as a whole or in any EEA country.

2.1.3.   Optical retail

Optical retail

| (31) | The Commission found that there are no affected markets in optical retail in the EEA. In addition, Essilor brings small market share increments to the retail market, where Luxottica has limited market shares, including in the United Kingdom and Italy. Furthermore, Luxottica and Essilor are distant competitors in optical retail as Essilor focuses on online sales of contact lenses, while Luxottica specialises in brick-and-mortar retail of eyewear and online retail of sunglasses. |
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(31)

The Commission found that there are no affected markets in optical retail in the EEA. In addition, Essilor brings small market share increments to the retail market, where Luxottica has limited market shares, including in the United Kingdom and Italy. Furthermore, Luxottica and Essilor are distant competitors in optical retail as Essilor focuses on online sales of contact lenses, while Luxottica specialises in brick-and-mortar retail of eyewear and online retail of sunglasses.

| (32) | The Commission concludes that the Transaction will not significantly impede effective competition as a result of horizontal non-coordinated effects in markets for optical retail in any EEA country, in particular the UK and Italy. |
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(32)

The Commission concludes that the Transaction will not significantly impede effective competition as a result of horizontal non-coordinated effects in markets for optical retail in any EEA country, in particular the UK and Italy.

2.1.4.   Brand licensing

Brand licensing

| (33) | Both Essilor and Luxottica are active in brand licensing as actual or potential acquirers of licenses. The Commission found, however, that Essilor and Luxottica have different profiles because Luxottica's portfolio of licensed brands includes prestigious fashion and luxury brands while Essilor's has few brands with low brand appeal and achieves low market shares. |
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(33)

Both Essilor and Luxottica are active in brand licensing as actual or potential acquirers of licenses. The Commission found, however, that Essilor and Luxottica have different profiles because Luxottica's portfolio of licensed brands includes prestigious fashion and luxury brands while Essilor's has few brands with low brand appeal and achieves low market shares.

2.2.   Assessment of vertical non-coordinated effects

Assessment of vertical non-coordinated effects

| (34) | The Commission concludes that the Transaction will not significantly impede effective competition as a result of vertical non-coordinated effects in the following vertically affected markets.






  (a) | With regard to the supply by Essilor of ophthalmic substrate as raw material and Luxottica's lens production, the Commission comes to this conclusion due to the presence of sufficient alternative suppliers of ophthalmic substrate and the very small market position of Luxottica in the downstream market for lenses in the EEA. |
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(34)

The Commission concludes that the Transaction will not significantly impede effective competition as a result of vertical non-coordinated effects in the following vertically affected markets.

(a)

With regard to the supply by Essilor of ophthalmic substrate as raw material and Luxottica's lens production, the Commission comes to this conclusion due to the presence of sufficient alternative suppliers of ophthalmic substrate and the very small market position of Luxottica in the downstream market for lenses in the EEA.

| (b) | In relation to the supply by Essilor of surfacing, coating and glazing machines as well as consumables and Luxottica's lens production, the Commission reaches its conclusion owing to the presence of sufficient alternative suppliers of ophthalmic machines and consumables and the very small market position of Luxottica in the downstream market for lenses in the EEA. |
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(b)

In relation to the supply by Essilor of surfacing, coating and glazing machines as well as consumables and Luxottica's lens production, the Commission reaches its conclusion owing to the presence of sufficient alternative suppliers of ophthalmic machines and consumables and the very small market position of Luxottica in the downstream market for lenses in the EEA.

| (c) | As regards the supply by Essilor of sun plano lenses and Luxottica's sunglasses production, the Commission draws its conclusion in the light of Essilor's minimal sales and the existence of sufficient alternative suppliers (3). |
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(c)

As regards the supply by Essilor of sun plano lenses and Luxottica's sunglasses production, the Commission draws its conclusion in the light of Essilor's minimal sales and the existence of sufficient alternative suppliers (3).

3

| (d) | In respect of the supply by Essilor of lenses and Luxottica's retail activities, the Commission arrives at its conclusion considering the presence of sufficient alternative lens suppliers and the limited size of the merged entity's retail business in the EEA. |
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(d)

In respect of the supply by Essilor of lenses and Luxottica's retail activities, the Commission arrives at its conclusion considering the presence of sufficient alternative lens suppliers and the limited size of the merged entity's retail business in the EEA.

| (e) | In respect of the supply by Essilor of commercial glazing machines and Luxottica's retail activities, the Commission arrives at its conclusion considering the presence of sufficient alternative suppliers of ophthalmic machines and the limited size of the merged entity's retail business in the EEA. |
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(e)

In respect of the supply by Essilor of commercial glazing machines and Luxottica's retail activities, the Commission arrives at its conclusion considering the presence of sufficient alternative suppliers of ophthalmic machines and the limited size of the merged entity's retail business in the EEA.

| (f) | As for the supply by Luxottica of frames and sunglasses and Essilor's retail activities, the Commission comes to its conclusion in view of Essilor's very limited presence in optical retail. |
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(f)

As for the supply by Luxottica of frames and sunglasses and Essilor's retail activities, the Commission comes to its conclusion in view of Essilor's very limited presence in optical retail.

2.3.   Assessment of conglomerate non-coordinated effects

Assessment of conglomerate non-coordinated effects

| (35) | The Transaction leads to conglomerate links between the Parties' wholesale of eyewear, lenses, table-top edgers and contact lenses since the Parties sell those products to the same customer base in the EEA, namely to optical retailers. |
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(35)

The Transaction leads to conglomerate links between the Parties' wholesale of eyewear, lenses, table-top edgers and contact lenses since the Parties sell those products to the same customer base in the EEA, namely to optical retailers.

| (36) | The Commission's assessment of conglomerate non-coordinated effects focuses on (i) the potential leveraging of Luxottica's position in eyewear to foreclose competitors in lenses; (ii) the potential leveraging of Essilor's position in lenses to foreclose competitors in eyewear; (iii) the potential leveraging of Essilor's position in ophthalmic machines (table-top edgers) to foreclose competitors in eyewear; (iv) the leveraging of Luxottica's position in eyewear to foreclose competitors in contact lenses or ophthalmic machines. |
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(36)

The Commission's assessment of conglomerate non-coordinated effects focuses on (i) the potential leveraging of Luxottica's position in eyewear to foreclose competitors in lenses; (ii) the potential leveraging of Essilor's position in lenses to foreclose competitors in eyewear; (iii) the potential leveraging of Essilor's position in ophthalmic machines (table-top edgers) to foreclose competitors in eyewear; (iv) the leveraging of Luxottica's position in eyewear to foreclose competitors in contact lenses or ophthalmic machines.

2.3.1.   Leveraging of Luxottica's position in eyewear to foreclose competitors in lenses

Leveraging of Luxottica's position in eyewear to foreclose competitors in lenses

Ability to foreclose

| (37) | The Commission takes the view that Luxottica has a certain degree of market power in the wholesale of sunglasses and a limited degree of market power in the wholesale of frames in the EEA but not sufficiently so to allow it to foreclose the Merged Entity's competitors in the lens markets. |
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(37)

The Commission takes the view that Luxottica has a certain degree of market power in the wholesale of sunglasses and a limited degree of market power in the wholesale of frames in the EEA but not sufficiently so to allow it to foreclose the Merged Entity's competitors in the lens markets.

| (38) | While Luxottica has a market share of [40-50] % at EEA level in sunglasses, the Commission concludes that Luxottica's market power is insufficient to allow it to foreclose the Merged Entity's competitors in the lens markets. This conclusion is based mainly on the fact that a large share of optical stores does not carry any Luxottica sunglasses, on feedback from a large number of opticians about the importance of Luxottica's sunglasses brands, on the small part of revenues that sunglasses sales represent for opticians and on the relative margin levels of sunglasses suppliers. |
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(38)

While Luxottica has a market share of [40-50] % at EEA level in sunglasses, the Commission concludes that Luxottica's market power is insufficient to allow it to foreclose the Merged Entity's competitors in the lens markets. This conclusion is based mainly on the fact that a large share of optical stores does not carry any Luxottica sunglasses, on feedback from a large number of opticians about the importance of Luxottica's sunglasses brands, on the small part of revenues that sunglasses sales represent for opticians and on the relative margin levels of sunglasses suppliers.

| (39) | The Merged Entity has a low market share in frames, at [10-20] % in the EEA, and the evidence collected by the Commission did not support claims that Luxottica has ‘must have’ frames brands for opticians. A large share of optical stores does not carry any Luxottica frames and the feedback received from a large number of opticians did not suggest that Luxottica's market power went beyond that indicated by its market share. |
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(39)

The Merged Entity has a low market share in frames, at [10-20] % in the EEA, and the evidence collected by the Commission did not support claims that Luxottica has ‘must have’ frames brands for opticians. A large share of optical stores does not carry any Luxottica frames and the feedback received from a large number of opticians did not suggest that Luxottica's market power went beyond that indicated by its market share.

Incentives to foreclose

| (40) | The Commission considers that a distinction should be made between the incentives of the Merged Entity to engage in tying (where the Merged Entity would make its sales of Luxottica sunglasses or frames, or both, conditional on the customer also purchasing Essilor lenses), which appear to be limited, and incentives to engage in mixed bundling (where the Merged Entity would offer a bundle of Luxottica sunglasses or frames, or both, on the one hand and Essilor lenses on the other hand at a cheaper price than when the products are purchased individually), which are more likely. |
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(40)

The Commission considers that a distinction should be made between the incentives of the Merged Entity to engage in tying (where the Merged Entity would make its sales of Luxottica sunglasses or frames, or both, conditional on the customer also purchasing Essilor lenses), which appear to be limited, and incentives to engage in mixed bundling (where the Merged Entity would offer a bundle of Luxottica sunglasses or frames, or both, on the one hand and Essilor lenses on the other hand at a cheaper price than when the products are purchased individually), which are more likely.

Incentives to engage in tying

| (41) | The Commission considers that the Merged Entity will not have any incentives to engage in tying by using its position in frames and/or sunglasses to induce opticians to buy more Essilor lenses. Luxottica has used tying of different products only to a very limited extent in the past and there are no indications in the Parties' internal documents that they plan to tie sales of eyewear with sales of lenses following the Transaction. In addition, a significant number of customers responding to the market investigation indicated that they would in general reject any tying practices and that this would encourage them to seek alternative suppliers. Moreover, Luxottica's variable cost margins on a pair of sunglasses and frames are higher than Essilor's margins on a pair of lenses, indicating – together with the other results of the Commission's investigation – that the Merged Entity is likely to incur significant losses if it engages in tying. |
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(41)

The Commission considers that the Merged Entity will not have any incentives to engage in tying by using its position in frames and/or sunglasses to induce opticians to buy more Essilor lenses. Luxottica has used tying of different products only to a very limited extent in the past and there are no indications in the Parties' internal documents that they plan to tie sales of eyewear with sales of lenses following the Transaction. In addition, a significant number of customers responding to the market investigation indicated that they would in general reject any tying practices and that this would encourage them to seek alternative suppliers. Moreover, Luxottica's variable cost margins on a pair of sunglasses and frames are higher than Essilor's margins on a pair of lenses, indicating – together with the other results of the Commission's investigation – that the Merged Entity is likely to incur significant losses if it engages in tying.

Incentives to engage in mixed bundling

| (42) | The Commission considers that the Merged Entity will have incentives to engage in mixed bundling by offering pairs of eyewear and matching lenses together as ‘complete jobs’ at a cheaper price than if purchased separately. This is based on past offers and future plans by both Essilor and Luxottica. |
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(42)

The Commission considers that the Merged Entity will have incentives to engage in mixed bundling by offering pairs of eyewear and matching lenses together as ‘complete jobs’ at a cheaper price than if purchased separately. This is based on past offers and future plans by both Essilor and Luxottica.

Effects of foreclosure

| (43) | Even in the unlikely event of attempted foreclosure, the results of the market investigation did not suggest that the ability of lens rivals to exert competitive pressure on Essilor would be hindered if they lost market share. The available data on scale efficiencies does not suggest that suppliers with smaller market shares would suffer from a lack of scale economies. Moreover, according to the Commission's quantitative analysis, any hypothetical loss of market share by lens competitors would in any event be relatively modest. |
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(43)

Even in the unlikely event of attempted foreclosure, the results of the market investigation did not suggest that the ability of lens rivals to exert competitive pressure on Essilor would be hindered if they lost market share. The available data on scale efficiencies does not suggest that suppliers with smaller market shares would suffer from a lack of scale economies. Moreover, according to the Commission's quantitative analysis, any hypothetical loss of market share by lens competitors would in any event be relatively modest.

| (44) | The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for ophthalmic lenses as a result of conglomerate non-coordinated effects due to the leveraging of Luxottica's position in eyewear, either at EEA level or at national level. |
| --- | --- |

(44)

The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for ophthalmic lenses as a result of conglomerate non-coordinated effects due to the leveraging of Luxottica's position in eyewear, either at EEA level or at national level.

2.3.2.   Leveraging of Essilor's position in ophthalmic lenses to foreclose competitors in eyewear

Leveraging of Essilor's position in ophthalmic lenses to foreclose competitors in eyewear

| (45) | Considering that customers have limited preferences for specific lens brands and stronger preferences for specific eyewear brands, it is unrealistic to assume that the Parties could use their position in lenses to impose eyewear sales on customers via a leveraging strategy. The Commission's investigation showed that any such attempt would be opposed by customers, who would be willing and able to switch to a competing lens supplier in order to avoid being pushed into purchasing Luxottica frames against their own better judgment. |
| --- | --- |

(45)

Considering that customers have limited preferences for specific lens brands and stronger preferences for specific eyewear brands, it is unrealistic to assume that the Parties could use their position in lenses to impose eyewear sales on customers via a leveraging strategy. The Commission's investigation showed that any such attempt would be opposed by customers, who would be willing and able to switch to a competing lens supplier in order to avoid being pushed into purchasing Luxottica frames against their own better judgment.

| (46) | While Essilor's lens market shares are appreciably higher than Luxottica's eyewear market shares, lenses are a far more commoditised product with only limited customer preference for specific brands. This is also reflected by the profit margins that companies earn in the two markets, which are considerably smaller for lenses than for eyewear (thus indicating an appreciably larger degree of pricing power in eyewear). The Commission considers that competitive harm through leverage from the lens market into the eyewear market is implausible in the current case. |
| --- | --- |

(46)

While Essilor's lens market shares are appreciably higher than Luxottica's eyewear market shares, lenses are a far more commoditised product with only limited customer preference for specific brands. This is also reflected by the profit margins that companies earn in the two markets, which are considerably smaller for lenses than for eyewear (thus indicating an appreciably larger degree of pricing power in eyewear). The Commission considers that competitive harm through leverage from the lens market into the eyewear market is implausible in the current case.

| (47) | The Commission concludes that the Merged Entity will not be able and will not have incentives to leverage its position in lenses in the EEA by linking its sales to those of frames or sunglasses to an extent that would cause foreclosure of competing suppliers of frames and sunglasses by reducing their ability or incentives to compete. |
| --- | --- |

(47)

The Commission concludes that the Merged Entity will not be able and will not have incentives to leverage its position in lenses in the EEA by linking its sales to those of frames or sunglasses to an extent that would cause foreclosure of competing suppliers of frames and sunglasses by reducing their ability or incentives to compete.

| (48) | The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for frames or sunglasses as a result of conglomerate non-coordinated effects due to the leveraging of Essilor's position in lenses, either at EEA level or at national level. |
| --- | --- |

(48)

The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for frames or sunglasses as a result of conglomerate non-coordinated effects due to the leveraging of Essilor's position in lenses, either at EEA level or at national level.

2.3.3.   Leveraging of Essilor's position in ophthalmic machines to foreclose competitors in eyewear

Leveraging of Essilor's position in ophthalmic machines to foreclose competitors in eyewear

| (49) | Essilor sells only one type of ophthalmic machines to ECPs, namely table-top edgers, in which it has a market share in the EEA of 40-45 %. Most of the demand for these products comes from customers with buyer power, such a large chains or buying groups. Competition from imports is increasing, with imports from outside the EEA already accounting for about 35 % of EEA demand. |
| --- | --- |

(49)

Essilor sells only one type of ophthalmic machines to ECPs, namely table-top edgers, in which it has a market share in the EEA of 40-45 %. Most of the demand for these products comes from customers with buyer power, such a large chains or buying groups. Competition from imports is increasing, with imports from outside the EEA already accounting for about 35 % of EEA demand.

| (50) | The Commission has found past instances of Essilor bundling sales of ophthalmic lenses and sales of ophthalmic machines, but not of Essilor tying those two product groups. Bundling Essilor's machines with frames or sunglasses would result in a high churn rate as opticians do not have strong brand preferences for ophthalmic machines. In addition, eyewear competitors would not be foreclosed as most of them have a global or international footprint. |
| --- | --- |

(50)

The Commission has found past instances of Essilor bundling sales of ophthalmic lenses and sales of ophthalmic machines, but not of Essilor tying those two product groups. Bundling Essilor's machines with frames or sunglasses would result in a high churn rate as opticians do not have strong brand preferences for ophthalmic machines. In addition, eyewear competitors would not be foreclosed as most of them have a global or international footprint.

| (51) | The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for frames or sunglasses across national markets in the EEA as a result of conglomerate non-coordinated effects due to the leveraging of Essilor's position in optical machines sold to ECPs at the EEA level. |
| --- | --- |

(51)

The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for frames or sunglasses across national markets in the EEA as a result of conglomerate non-coordinated effects due to the leveraging of Essilor's position in optical machines sold to ECPs at the EEA level.

2.3.4.   Leveraging of Luxottica's position in eyewear to foreclose competitors in contact lenses and ophthalmic machines

Leveraging of Luxottica's position in eyewear to foreclose competitors in contact lenses and ophthalmic machines

| (52) | The Commission has not found any evidence to substantiate the claim that the Merged Entity could leverage its strength in eyewear markets to foreclose competitors in other products sold to ECPs, in particular contact lenses and ophthalmic machines (table-top edgers). |
| --- | --- |

(52)

The Commission has not found any evidence to substantiate the claim that the Merged Entity could leverage its strength in eyewear markets to foreclose competitors in other products sold to ECPs, in particular contact lenses and ophthalmic machines (table-top edgers).

| (53) | Essilor is currently hardly active in the supply of contact lenses. It does not manufacture contact lenses but resells these products only to accommodate certain retailers. No optician has submitted during the market investigation that they would consider Essilor as a contact lenses supplier. |
| --- | --- |

(53)

Essilor is currently hardly active in the supply of contact lenses. It does not manufacture contact lenses but resells these products only to accommodate certain retailers. No optician has submitted during the market investigation that they would consider Essilor as a contact lenses supplier.

| (54) | For similar reasons as those set out in paragraphs (38) and (39), Luxottica does not hold a sufficient degree of market power in frames and sunglasses to foreclose suppliers of table-top edgers. Furthermore, opticians can easily switch away from Essilor's table-top edgers in response to any tied or bundled offer. |
| --- | --- |

(54)

For similar reasons as those set out in paragraphs (38) and (39), Luxottica does not hold a sufficient degree of market power in frames and sunglasses to foreclose suppliers of table-top edgers. Furthermore, opticians can easily switch away from Essilor's table-top edgers in response to any tied or bundled offer.

| (55) | The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for contact lenses or table-top edges in the EEA as a result of conglomerate non-coordinated effects due to the leveraging of Luxottica's position in eyewear. |
| --- | --- |

(55)

The Commission therefore takes the view that the Transaction will not significantly impede effective competition in markets for contact lenses or table-top edges in the EEA as a result of conglomerate non-coordinated effects due to the leveraging of Luxottica's position in eyewear.

V.   CONCLUSION AND PROPOSAL

CONCLUSION AND PROPOSAL

| (56) | The attached Article 8(1) decision concludes that the Transaction would not significantly impede effective competition in the internal market or in a substantial part of it. Consequently, the attached decision declares the concentration compatible with the internal market and the EEA Agreement, in accordance with Articles 2(2) and Article 8(1) of the Merger Regulation and Article 57 of the EEA Agreement. |
| --- | --- |

(56)

The attached Article 8(1) decision concludes that the Transaction would not significantly impede effective competition in the internal market or in a substantial part of it. Consequently, the attached decision declares the concentration compatible with the internal market and the EEA Agreement, in accordance with Articles 2(2) and Article 8(1) of the Merger Regulation and Article 57 of the EEA Agreement.

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(1)  OJ L 24, 29.1.2004, p. 1.

1

(2)  Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).

2

(3)  The Commission has also assessed claims of potential foreclosure from access to wet-block acetate, a component which is used to produce frames and sunglasses. Considering that Luxottica currently sources a moderate part of each of the two suppliers' capacity and that Essilor adds very little to Luxottica's wholesale eyewear activities in the EEA, the Commission concludes that there is no risk of foreclosure from access to wet-bloc acetate for eyewear competitors.

3

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