September 11, 2017 / 3:18 PM / a month ago

Exclusive: EU regulators have concerns over Luxottica-Essilor merger - source

BRUSSELS (Reuters) - EU anti-trust regulators will meet Luxottica (LUX.MI) and Essilor (ESSI.PA) this week to express concerns about their plan to merge into a 46 billion-euro ($55.12 billion) global eyewear powerhouse, a person familiar with the matter said on Monday.

FILE PHOTO: Sunglasses from Ray Ban, a Luxottica owned brand, are on display at an optician shop in Hanau, Germany, March 18, 2016. REUTERS/Kai Pfaffenbach/File Photo

The move suggests the European Commission wants concessions to address their concerns and that they could open an in-depth investigation if these are not given or seen as insufficient.

Italy’s Luxottica is the world’s largest maker of spectacles, owning brands such as Ray-Ban and Oakley, and has 9,000 retail stores. France’s Essilor is the world’s top lens-maker.

Luxottica declined to comment. Essilor was not immediately available for comment.

EU Competition Commissioner Margrethe Vestager told Reuters this month that the deal would require careful vetting given the size of the two companies’ market shares. The commission is seeking views from all interested parties.

Some retailers fear being undercut by an Essilor-Luxottica group able to offer famous brands and prescription lenses at prices they could not hope to match without hurting margins.

“This is a significant development which will result in huge supply-chain and retail implications for the industry and consumers worldwide,” Specsavers, an international retail partnership, said in a statement emailed to Reuters.

Specsavers, which says it has 1,700 stores in 10 countries, and some others in the industry have said they doubt the merger would be felt immediately by consumers.

In the first regulatory ruling on the merger, New Zealand’s competition regulator approved the deal last week, saying Luxottica-Essilor would “be sufficiently constrained by the presence of existing competitors with the ability to expand at all levels of the supply chain and in all relevant markets”.

Lens-makers, too, are watching developments closely, given that Essilor will have access to Luxottica’s retail chains spanning the Americas, Europe and the Asia-Pacific.

Essilor, in its half-year earnings briefing in July, referred to “a challenging market reaction” to the merger. It acknowledged that some of its customers had switched away from Essilor, but said there had been no major sales impact.

“The eyeglass market is competitive. Customers have choices,” Essilor Chief Operating Officer Laurent Vacherot said.

Japanese lens-maker Hoya Corp (7741.T) expects the effect to be felt on the high street rather than on its own core business, with retailers pressured to lower prices by a few percentage points annually, said a source familiar with the matter.

Hoya expects the pressure to be felt most keenly in the United States, which accounts for about a third of Hoya’s global business, the source said. Hoya sells mostly to independent stores and wants to channel more of its sales via chain stores.

($1 = 0.8345 euros)

Additional reporting by Valentina Za in MILAN, Charlotte Greenfield in WELLINGTON, Naomi Tajitsu in TOKYO, Tom Westbrook in SYDNEY and Matthias Blamont in PARIS, editing by Larry King

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