Being a David as the Goliaths Gain Power

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Have you ever felt like an airline, bank, or cable company exploited its monopoly status by treating a customer poorly?  Of course, that is a rhetorical question because we have all wanted to pull our hair out at one time or another by the inability to jump ship when dissatisfied by a product or service offered by the likes of United Airlines, Comcast, AT&T, and Wells Fargo.  It’s a classic David vs. Goliath conflict, where Goliaths of the consolidated industries have been allowed to grow in power and number as anti-trust regulations grew lax in recent decades.  In early 2017, two of the Goliaths in eye care announced that they would merge as Luxottica agreed to be acquired by Essilor.  It is my opinion that if allowed to proceed, the merger would result in a monopoly-like status for the joined companies, driving increased cost and limited choice for eye care consumers.  In this blog post, I will explain the importance of remaining a David while the Goliaths gain power in eye care.

Anti-Trust Concern
Since the planned merger of Luxottica-Essilor was announced in January, I have attempted to write a blog post on this topic several times, each time giving up because the story is complex and others had already done a great job describing it.  For example, here is a link to an insightful post written by Al Cleinman, someone I hold in the highest regard when it comes to wisdom on these matters.  His blog post is full of pertinent facts and figures.

Concern over Luxottica’s monopolistic behavior is not new.   60 Minutes aired this story in 2012:

In this Forbes article from 2014, Luxottica is described as “the four-eyed, eight-tentacled monopoly that is making your glasses so expensive.”  Most of the article is well-written and accurate, aside from the portion where the author refers to ophthalmic eye wear as low-tech because most eyewear definitely not low-tech.  I strongly agree with her assertion, “Having control over the pricing of a huge variety of different brands means Luxottica can also carefully engineer the prices of different brands to encourage you to shell out an additional $80 for that beloved logo or streak of Tiffany blue.”  Bingo!

John Oliver discussed Luxottica at the 10-minute mark in this episode of Last Week Tonight in September (contains explicit language):

Today another article started to float around.  It is the most well-articulated case against the merger that I have seen, and it is important enough to paste the full text below in its entirety.   The author is an anti-trust attorney named David Balto, and he is hoping that the U.S. government will explore anti-trust enforcement to block the merger.  The European Union began a full investigation earlier this year.

As an aside, the David vs. Goliath theme in this post was partially inspired by David Balto’s name.

Who are Luxottica and Essilor?  Why haven’t I heard of them before?
Luxottica (NYSE: LXFT) is the Italian parent company for the following entities:
(1)  Eyemed vision care, a vision plan that boasts having 87k in-network vision care providers on its home page.  There are approximately 50 million people covered by Eyemed in the United States.
(2)  Corporate eye care locations Lenscrafters, Pearle, Sunglass Hut, Target Optical, Sears Optical, JC Penney Optical, as well as a few others.  Eyemed actively promotes these corporate locations by telling patients that their benefits will reap more savings there than with the private practice doctor they have come to trust.  They mine the data provided with claim submissions to market directly to our patients.
(3)  Many popular and recognizable frame lines such as RayBan, Oakley, Coach, Chanel, Prada, Michael Kors, and Versace.  Their Vogue frame company recently introduced a line in partnership with the supermodel, Gigi Hadid.  Here is a screen-shot taken this morning from the Luxottica home page:
Luxottica Brands as of Nov 2017

The other player in this potential merger is France’s Essilor (EPA: EI), the world’s largest manufacturer of ophthalmic lenses.  While Essilor is not necessarily a household name, many of their products are well-known.  Essilor produces popular brands such as Varilux, Transitions, Crizal, and Foster Grant, just to name a few.  They also own a large alliance of private optometric practices known as Vision Source, and online retailers such as,, and

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We Need the Davids
It’s kind of dizzying isn’t it?  I struggle to keep up even though I am immersed in it every day, so it is understandable that the average eye care consumer would be unable to comprehend the scale and anti-trust ramifications of the proposed merger.  It is my opinion (shared by many others), that the merger would allow these companies to further drive up costs and limit choices for American eye care consumers.

In my office, we are asked some version of the following questions on a regular basis:
“Why don’t you accept Eyemed vision insurance?”
“Why don’t you carry RayBan?”

In other words, why haven’t I allowed Goliath to infiltrate my practice?  The simplest answer is that I believe my patients deserve affordable and quality choices.   I also care deeply about personalized service, competition, and American jobs.  However, while that soundbite is absolutely true, it is difficult to explain the big picture in a quick 30-second conversation.

In short, supporting Luxottica and Essilor would further empower them to erode the private practice model of eye care.  It has not been an easy position to take from a business standpoint.  In fact, it has slowed the growth of my practice by many of the traditional measures because a lot of people leave my office to purchase Luxottica products elsewhere, but I decided five years ago that I would differentiate myself and my practice by standing for fierce independence.  If I remain a David, I can also remain true to the ideals that are most important to me.

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Looking on the bright side, David eventually conquered Goliath in the ancient story.  Likewise, I believe that the personalized, quality service of small practices can — and must — prevail  over the big conglomerate model.  Slowly but surely, my approach is working as patients express loyalty and appreciation.

Our patients want to be heard, and they need us to fight for this ideal, otherwise our profession will mimic the airline, bank, and cable company industries as private practices fade away.  I shudder at the thought.

In my next few posts, I will describe specific examples to illustrate how quality of care and patient experiences are altered, starting with a simple comparison between RayBan and MauiJim sunglasses.  The difference can be striking.  Until then, please enjoy the article by David Balto linked and pasted below.  –LMH

Get ready to pay when one company dominates the eyeglass market


Last year Sen. Elizabeth Warren (D-Mass.) threw down the gauntlet in antitrust enforcement. “Today, in America, competition is dying,” Warren said. “Consolidation and concentration are on the rise in sector after sector. Concentration threatens our markets, threatens our economy, and threatens our democracy.”

Today, the merger of Luxottica and Essilor threatens to create a vision care monopoly and you don’t need a corrected prescription to clearly see it will harm consumers with higher prices and less choice. The question remains: When will we be tough enough to prevent harmful consolidation?

It’s easy to see why the merger of Essilor and Luxottica should be denied. The merger would combine the world’s largest eyewear company with the world’s largest manufacturer of optical lenses. But that is an oversimplification. The merger also involves the U.S.’s second largest vision insurance company, owned by Luxottica, and the U.S.’s largest optical retailer, composed of many companies all owned by Luxottica.

That’s still not the whole story, the combined Essilor and Luxottica will exert control over 83 percent of optometrists through Luxottica’s EyeMed Vision Care company. EyeMed has 43 million members and is accepted at over 30,000 U.S. optometrists. Luxottica uses this vision benefits company largely to steer patients towards Luxottica’s own products.

But wait, there’s more. Luxottica has been featured twice in the news for its ability to command high prices and bully competitors. In 2012, 60 Minutes ran a story on the false choice in eyeglass frames, explaining that most brands you see in the stores are owned by the same company. The reporter attributed sky-high prices to the lack of choices. And John Oliver ran a piece this year that explained how Luxottica used its vertical market power to pressure Oakley into selling its company after a dispute with Luxottica over pricing.

Even the Democratic Party has signaled out this merger as being dangerous for consumers. Senate Democrats launched their A Better Dealplatform with an explicit mention of the Essilor/Luxottica merger as a merger that would “harm consumers, workers, and competition.” Their white paper points out “the current average price of eyeglasses is now at $400, a cost in line with an iPad, and is steadily rising.”

A combined Luxottica and Essilor company would have enormous power over every stage of producing and selling eyewear. Luxottica in particular has pursued a strategy of gobbling up brands and presenting consumers with false choices. Altogether, Luxottica has nine house brands and is licensed to produce and distribute another 21 more. These brands include Ray-Ban, Oakley, Oliver Peoples, Georgio Armani, Coach, DKNY, Prada, Ralph Lauren, Versace and DKNY. Luxottica also owns over 9,000 stores, including Sunglass Hut, LensCrafters, Pearle Vision, Sears Optical, and Target Optical.

Things are already bad. Since Luxottica bought Ray-Ban almost 20 years ago, the average selling price has gone up, and so have Luxottica’s profit margins. The merger could only make things worse.

Some might suggest the merger raises few concerns because it is vertical, meaning that the companies are mostly on different levels of the supply chain. Essilor makes lenses and Luxottica makes frames. In early antitrust policy there were complaints that we over-enforced against these types of mergers, and economists published evidence that vertical mergers can actually provide some benefits. This led to a massive pendulum swing, but with the DOJ’s challenge to the AT&T Time Warner merger it appears the pendulum is swinging backwards.

All it takes is an antitrust enforcer willing to fight and good evidence, and here there is a lot of good evidence that this merger will harm consumers and competition.

Consumers need real choice, not fake choice in the eyeglass market. Consumers also need real competition to curb the sky-high prices of eyeglasses. They will get neither of this merger is permitted to go through. We’ve already seen the E.U. get tough on this merger — they opened a full-scale investigation in September. It is now time for the U.S. to step up to the plate.

David Balto is an antitrust attorney based in Washington, D.C.. He previously served as policy director at the Federal Trade Commission and as an attorney in the Justice Department’s Antitrust Division. He is an expert in antitrust, consumer protection, financial services, intellectual property and health care competition.

Edit on April 2, 2018:   American and European regulators have approved the merger of merger of Luxottica and Essilor.
Click here for a Reuters report on the approval of the European Union.
Click here for a Financial Times report on the assessment by the American Federal Trade Commission.