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CADE’s Tribunal dismisses the appeal and approves Essilor/Luxottica International merger

Merger

CADE unanimously concluded that there are no competition concerns related to the merger and confirmed its approval
by Assessoria de Comunicação Social published: Mar 27, 2018 05:35 PM last modified: Mar 27, 2018 05:35 PM

The Administrative Council for Economic Defense (CADE) dismissed the appeal against the approval of the international merger between the French company Essilor and the Italian Luxxotica. In the hearing on 27/03/2018, CADE’s Tribunal concluded that there are no competition concerns related to the merger and confirmed the approval decision rendered by the General-Superintendence (SG).

The Commissioners, following the opinion of Reporting Commissioner Paulo Burnier, concluded that the reasons for the appeal were generic, without any element or new document able to support its allegations, even though they may be reasonable as private concerns.

The merger between the producers of eyeglasses frames and lenses was approved without restrictions by the General-Superintendence in February. In its approval opinion, the SG stated that these companies operate in complementary markets, with low horizontal overlaps and with no incentives to anticompetitive practices due to the merger.

“Besides the fact that a market foreclosure is unlikely, other players will be able to continue to compete with the merging companies to supply cheaper and better products, which will, ultimately, benefit consumers. Therefore, the present operation does not significantly impact the competition in the Brazilian market”, the SG affirmed.

Appeal

In March, Zeiss, an interested third party, filed an appeal against the approval rendered by the SG. According to the company, the approval would result in “substantial concentration and integration” in all sectors of the eye care segment, giving rise to serious competition concerns. 

Amongst the concerns pointed out by the company, it can be mentioned the reinforcement of dominant position in vertically integrated markets, the conglomerate effects capable of creating incentives to discriminatory practices and the lack of proven positive effects from the merger.

CADE’s Decision

In the hearing this Tuesday, Commissioner Paulo Burnier understood that the analysis made by SG was “consistent in light of the allegations brought by the appellant company”.

The Commissioners, in contrast with the arguments of the appellant, stated that the possibility of joint sale of different products could enhance the competition in the retail market, enabling the sale of cheaper or better products and benefiting the end consumer.

“Finally, it is worth noting that the international scenario corroborates the approval decision. This is due to the fact that the market shares of the merging companies are not superior compared to those in Europe – which refutes the appellant’s argument that Brazilian market has particularities that justify CADE’s intervention.

International Merger

The Essilor/Luxottica merger was notified in 20 jurisdictions. Until this day, the operation was approved, without restrictions, in all concluded analysis, including Chile, Colombia, Mexico, United States and European Union. The decision is still pending in China, Singapore and Turkey.

Future acquisitions

Despite the lack of competition concerns, the companies made a commitment to notify CADE of every acquisition they perform in the Brazilian market in the next five years, in order to enable the monitoring of the acquisition process in the sector, even if the operations are not subject to mandatory notification.