Summary of Commission Decision of 23 March 2021 declaring a concentration compatible with the internal market and the functioning of the EEA Agreement (Case M.9569 – EssilorLuxottica/GrandVision) (notified under document number C(2021) 1769)
Date: 2021-03-23
Institutions: Directorate-General for Competition, European Commission
Subjects: economic concentration, merger control, optical industry, retail selling








C_202402892EN.000101.fmx.xml












Official Journal of the European Union


EN
C series













C/2024/2892


25.4.2024







            SUMMARY OF COMMISSION DECISION
         
of 23 March 2021
         
declaring a concentration compatible with the internal market and the functioning of the EEA Agreement
(Case M.9569 – EssilorLuxottica/GrandVision)


(notified under document number C(2021) 1769)


(Only the English version is authentic)
(Text with EEA relevance)
(C/2024/2892)


On 23 March 2021 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
          (1)
, and in particular Article 8(2) 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:



https://competition-cases.ec.europa.eu


1.   THE PARTIES









(1)


EssilorLuxottica S.A. (‘EssilorLuxottica’) is a French-Italian vertically integrated multinational company based in Paris and created on 1 October 2018 after the merger of the Italian Luxottica Group S.p.A. (‘Luxottica’) and the French Essilor International S.A. (‘Essilor’). EssilorLuxottica is active in (i) every phase of the ophthalmic (corrective) lens development, from design to manufacture to wholesale, (ii) the design, manufacture and distribution of eyewear, namely optical frames (references to ‘prescription frames’, or ‘frames’ in this document should be read as references to optical frames) and sunglasses, and (iii) the retail sales of optical products, through a network that counts over 9 100 own, franchise and online retail stores globally. The concentration that led to the creation of EssilorLuxottica was, after an in-depth examination, declared compatible with the internal market and the functioning of the EEA Agreement without conditions, by Commission decision of 1 March 2018 (2).












(2)


GrandVision N.V. (‘GrandVision’) is a Dutch-based global company active in retail sale of optical products, with concentration in eye care. GrandVision offers a wide range of services linked to its large assortment of optical products comprising of prescription glasses, including frames and lenses, contact lenses and contact lens care products, as well as sunglasses, both plain or with prescription lenses. GrandVision operates 7 095 owned, franchise and online stores (including more than 5 000 stores in the EEA) and is the largest retailer of optical products in the EEA, almost twice the size of the second largest (Specsavers, the United Kingdom). GrandVision is currently under the sole control of the investment company HAL Optical Investments B.V. (‘HAL’), which owns approximately 76,72 % of the issued ordinary shares in GrandVision. The remainder of the shareholding is publicly traded on the Amsterdam Stock Exchange.




2.   THE OPERATION









(3)


On 23 December 2019, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 (the ‘Merger Regulation’) by which EssilorLuxottica acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of GrandVision (the ‘Transaction’).












(4)


The Transaction consists in the acquisition of GrandVision by EssilorLuxottica. On 30 July 2019, HAL and EssilorLuxottica entered into a block trade agreement by means of which EssilorLuxottica will purchase the entire shareholding of HAL in GrandVision at a price per share of EUR 28, representing a total consideration of approximately EUR 5 500 million. After the closing of the Transaction, EssilorLuxottica will launch a mandatory public offer for all outstanding GrandVision shares. After the mandatory public offer, EssilorLuxottica intends to delist GrandVision from Euronext Amsterdam and privately own 100 % of the shares of GrandVision. The Transaction constitutes a concentration pursuant to Article 3(1)(b) of the Merger Regulation.




3.   SUMMARY









(5)


On 6 February 2020, the Commission opened an in-depth investigation into the Transaction, raising serious doubts as to the compatibility of the Transaction with the internal market, due to the horizontal overlap at optical retail level in the UK and Italy, and the risk of input and customer foreclosure relating to prescription frames, sunglasses and lenses (upstream) and optical retail (downstream) in a number of countries in the EEA.












(6)


On 5 June, the Commission issued a Statement of Objections (‘SO’), in which it identified concerns relating to (i) the combination of horizontal and vertical effects of the Transaction in the UK and Italy, (ii) input foreclosure concerns for the wholesale of eyewear in several EEA countries, namely Austria, Belgium, Denmark, Finland, France, Hungary, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom, and (iii) customer foreclosure concerns for the purchase of lenses by optical retailers in France.












(7)


The Parties provided a response to the SO on 20 June 2020, and an oral hearing took place on 26 June 2020. Following the Parties’ defence, (i) as regards the main markets of horizontal and vertical overlaps (Italy and the UK), the Commission maintained concerns regarding Italy; (ii) the Commission maintained input foreclosure concerns in Italy, Belgium and the Netherlands; (iii) the Commission was able to dispel the other competition concerns it had preliminarily identified.












(8)


In order to remove the competition concerns, on 8 February 2021, the Parties submitted commitments pursuant to Article 8(2) of the Merger Regulation. The Commission launched a market test of these commitments on 9 February 2021.












(9)


On 22 February 2021, the Parties submitted a revised set of commitments pursuant to Article 8(2) of the Merger Regulation. The Commission launched a market test of these revised Commitments on 22 February 2021.












(10)


On 1 March 2021, the Parties submitted a further amended and final set of commitments pursuant to Article 8(2) of the Merger Regulation.












(11)


On 23 March 2021, the Commission adopted a clearance decision pursuant to Article 8(2) of the Merger Regulation (‘the Decision’).




4.   EXPLANATORY MEMORANDUM

4.1.   The relevant product markets









(12)


EssilorLuxottica is active both upstream, namely in (i) every phase of the ophthalmic (corrective) lens development, from design to manufacture to wholesale, (ii) and the design, manufacture and distribution of eyewear, and downstream in (iii) the retail sale of its own and third-party manufactured optical products. EssilorLuxottica is active worldwide, including in the EEA.












(13)


GrandVision is only active downstream, namely in the retail sale of optical products, globally but with a particular focus on, and footprint in, the EEA. GrandVision’s stores, which operate under a number of different banners, offer a wide range of optical services, prescription glasses, including frames and lenses, contact lenses and sunglasses, both plain and with prescription lenses.












(14)


The Transaction therefore leads to horizontal overlaps between the retail activities of GrandVision and EssilorLuxottica downstream, as well as to vertical links between the wholesale activities of EssilorLuxottica and the retail activities of GrandVision.












(15)


The Commission found that, for the purposes of this Decision, ophthalmic lenses constitute a separate product market. The relevant geographic market is national in scope.












(16)


The Commission found that, for the purposes of this Decision, the wholesale supply of frames and sunglasses constitute separate product markets, while the question of whether a sub-segmentation based on (i) price or (ii) branded/unbranded products would be necessary was left open. The relevant geographic market is national in scope.












(17)


The Commission found that, for the purposes of this Decision, the retail sale of optical products in brick-and-mortar optical stores (i.e. including both chains and independents, but excluding online sales and sales in sunglass specialist non-optical retailers) constitutes a separate product market. However, the competitive pressure exerted by online retailers on optical stores is taken into account in the competitive assessment. The relevant geographic scope of these market is local in scope, more specifically consisting of catchment areas that are typically not broader than 10km. However, the Commission also took into account the market structure at national level, in particular taking into account: (i) the fact that the Parties are both optical retail chains active at national level, (ii) their pricing decisions (iii) their pricing strategy, and thus (iv) the impact of the Transaction can be expected to occur across the country in the local areas in which they are present.




4.2.   Competitive assessment

4.2.1.   Italy – Horizontal non-coordinated effects and input foreclosure in frames and lenses

4.2.1.1.   Horizontal non-coordinated effects









(18)


The in-depth investigation confirmed that EssilorLuxottica and GrandVision are the largest chains active in Italy and the Transaction will create the largest player on the optical retail market, almost three times as large as the second player. While the Parties’ combined market share is modest, the majority of the market is represented by independent retailers, which are strongly differentiated from optical retail chains such as the Parties and less capable to determine their commercial strategy independently from branded products suppliers in particular (notably EssilorLuxottica).












(19)


In contrast, EssilorLuxottica and GrandVision’s banners compete closely, and GrandVision is an important competitive constraint in Italy to EssilorLuxottica given its significant and unique sourcing advantage, granting it significantly greater ability (than independent retailers in particular) to determine its commercial conditions independently from upstream wholesalers’ recommendations. Barriers to entry and expansion in Italy are high, in particular due to the: (i) high saturation of the optical retail market, (ii) high level of customer loyalty, (iii) limited supply of qualified and trained personnel, and (iv) need for minimum volume purchase of customer-driving brands. In light of the above, the Decision identified that the Transaction would give rise to a significant impediment to effective competition in Italy as a result of horizontal effects.




4.2.1.2.   Input foreclosure of eyewear









(20)


The in-depth investigation confirmed that, upstream, EssilorLuxottica has significant market power in the supply of eyewear to optical retailers and has a paramount importance as a wholesaler. It has significant market shares in frames and sunglasses. This market power is an even higher share of the branded segment, along with the largest and strongest portfolio. Its Ray-Ban brand is the strongest eyewear brand and has a substantial penetration in stores across Italy.












(21)


The analysis conducted as part of the in-depth investigation shows that an input foreclosure strategy is likely to be profitable in relation to frames in Italy. The analysis shows that a very limited number of consumers would need switch to the Parties’ stores for a 10 % wholesale price increase of frames by EssilorLuxottica to rival retailers to be profitable, thereby making such a strategy likely. The Decision also showed that this strategy would have a material effect in the downstream market. The Decision confirmed that the price increase at rival retailers due to input foreclosure would not be offset by a price reduction at GrandVision (for example due to the elimination of double marginalisation). In light of the above, the Decision identified that the Transaction would give rise to a significant impediment to effective competition in Italy as a result of input foreclosure of frames.




4.2.1.3.   Cumulative impact of horizontal and vertical effects









(22)


The in-depth investigation revealed that the Transaction would give rise to a significant impediment to effective competition in the Italian market for the retail of optical products due to the cumulative impact of three interlinked effects: (i) The horizontal effect of the loss of retail competition between EssilorLuxottica and GrandVision is amplified by the vertical impact of EssilorLuxottica’s strong upstream position; (ii) This upstream position means that EssilorLuxottica can recapture a proportion of sales lost at retail level through increased sales of its frames, lenses and sunglasses in rival retailers’ stores; and (iii) EssilorLuxottica will have an incentive to increase the wholesale price it charges to its retail competitors, who will face higher costs, and are likely to pass this on to consumers. The Decision found that, together, these effects are mutually reinforcing and likely to lead to higher prices for consumers, and thus a significant impediment to effective competition would arise due to these combined effects.




4.2.2.   Belgium and the Netherlands - Input foreclosure for frames









(23)


In Belgium and the Netherlands, the in-depth investigation showed that the Transaction gives rise to a risk that EssilorLuxottica would engage in an input foreclosure strategy, by worsening commercial conditions for the supply of optical frames to retailers that compete with GrandVision’s stores downstream.












(24)


In both countries, the upstream market share of the Parties is important, as well as the store penetration rates and the share of sales of Ray-Ban. The use of the store penetration rate parameter to gauge the market power of the merged entity beside market shares at national level, which are an imperfect indicator for highly differentiated products such as the ones at hand, is consistent with the approach taken in previous cases.












(25)


The quantitative analysis carried out as part of the in-depth investigation showed that the merged entity would have the incentive to engage in an input foreclosure strategy. In particular, a very limited number of consumers would need switch to the Parties’ stores for a 10 % wholesale price increase of frames by EssilorLuxottica to rival retailers to be profitable, thereby making such a strategy likely. Moreover, this strategy would have a material effect in the downstream market and on rivals. Indeed, there would be a strong impact on consumers as rivals retailers can be expected to pass on price increases to the end-consumer. In light of the above, the Decision identified that the Transaction would give rise to a significant impediment to effective competition in Belgium and the Netherlands as a result of input foreclosure of frames.




4.2.3.   Conclusion









(26)


Therefore, the Decision concluded that the concentration, as notified, would raise serious doubts as to its compatibility with the internal Market with regard to the optical retail markets in Italy, Belgium and the Netherlands.




4.3.   Undertakings submitted by the parties

4.3.1.   Overview of the undertakings submitted









(27)


In order to address the aforementioned competition concerns in the Belgian, Dutch and Italian markets, the Parties submitted the undertakings described below.












(28)


The Parties committed to implement structural remedies to resolve the competition concerns, namely a divestiture in each of these three member states as follows:




4.3.1.1.   Italy







—


The Parties commit to divest the whole of EssilorLuxottica’s VistaSi retail chain (102 stores) and 72 stores from the ‘GrandVision by’ chain (together, 174 stores). The VistaSi website is included and will transfer.










—


The ‘VistaSi’ brand will transfer to the purchaser and the ‘GrandVision by’ stores will either be rebranded to VistaSi or to the purchaser’s own brand.




4.3.1.2.   Belgium







—


In Belgium, the Parties commit to divest the entirety of its GrandOptical banner, which amounts to 35 stores.










—


The ‘GrandOptical’ brand name would not transfer to the purchaser. The purchaser would be granted a licence while rebranding these stores to its own choice of name.










—


The package includes a licence to use the www.GrandOptical.be website, exclusively for the purpose of accessing customers and performing sales in Belgium for the duration of the GrandOptical brand licence.




4.3.1.3.   The Netherlands







—


The Parties commit to divest 142 EyeWish stores, together with the EyeWish banner. This proposal includes EyeWish ‘owned’ stores and all EyeWish franchise stores in the Netherlands.










—


The Parties will keep some EyeWish stores, which they will rebrand to a different banner.










—


The proposal also includes the EyeWish online business, including the right to use the www.eyewish.nl domain.












(29)


The divestment businesses in Belgium (‘Belgium Divestment Business’) and Netherlands (‘Netherlands Divestment Business’) will be sold together to one purchaser. The divestment business in Italy (‘Italy Divestment Business’) will either be sold to the same purchaser as of the Belgium and Netherlands Divestment Businesses, or it will be sold to another purchaser. Given that rebranding is required in Belgium, the purchaser of the Belgium and Netherlands Divestment Businesses must have the ability to conduct a rebranding exercise in the retail sector.












(30)


In addition, the Parties have agreed to additional safeguards in order to ensure a timely and smooth implementation.




4.3.2.   Assessment of the undertakings submitted









(31)


The Commission found that the undertakings submitted are sufficient to remove the competition concerns identified in Italy, Belgium and the Netherlands.












(32)


The undertakings would reduce the retail footprint of the Parties, thus lessening the incentives for the merged entity to engage in an input foreclosure strategy in Italy, Belgium or the Netherlands. Moreover, as regards horizontal effects in Italy, the divestment would serve the purpose of reducing the merged entity’s downstream retail share and creating (or strengthening) a credible optical retail chain that is active at national level to constrain the merged entity.












(33)


In addition, the safeguards put in place provide additional comfort as to mitigate any residual implementation risks. The combination of the commitments and these safeguards will ensure not only a timely and smooth implementation, but also that the likelihood of viability, marketability and competitiveness of the Belgium, Italy and Netherlands Divestment Business is enhanced going forward.












(34)


The Decision therefore, concluded that the undertakings submitted by the Parties would remove the concerns identified in relation to (i) the horizontal effects, vertical effects and the combination of horizontal and vertical effects in the Italian optical retail market, and (ii) the risk of input foreclosure of frames in Belgium and the Netherlands.




5.   CONCLUSION









(35)


For the reasons mentioned above, the Decision concluded that the proposed concentration would not significantly impede effective competition in the Internal Market or in a substantial part of it.












(36)


Consequently, the concentration was declared compatible with the Internal Market and the functioning of the EEA Agreement, in accordance with Article 2(2) and Article 8(2) of the Merger Regulation and Article 57 of the EEA Agreement.






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

(2)  Commission decision C(2018) 1198 final of 1 March 2018 declaring a concentration to be compatible with the internal market and the EEA Agreement (Case M.8394 – ESSILOR / LUXOTTICA) (‘M.8394 Essilor/Luxottica’).


ELI: http://data.europa.eu/eli/C/2024/2892/oj
ISSN 1977-091X (electronic edition)