Is Luxottica A Monopoly?

Luxottica Group SpA is a vertically integrated Italian conglomerate and the biggest player in the eyewear industry. Its parent company EssilorLuxottica owns a large portfolio of popular eyeglass brands, a large footprint of optometry chains, and it’s the second-largest vision insurance company in the country.

So the obvious question arises, is Luxottica a monopoly?

The company was featured on TruTV’s Adam Ruins Everything with host Adam Conover claiming it holds 80 percent of the market. Snopes and other online fact checkers put the company’s market share as low as 10 percent. Still, its vertical integration and aggressive business tactics have gotten it into trouble over the years.

In fact, its hostile takeovers of Ray-Ban and TIL Oakley in the 1990s and 2000s made the brand name infamous in North America. At the time, Oakley was at the height of its popularity and seemed unstoppable. But Luxottica strangled the company out of its retail stores over a pricing dispute and ended up acquiring the brand.

What is the the truth behind the legend of EssilorLuxottica?

What Brands Are Owned by Luxottica?

Luxottica is a vertically integrated company. This means that it owns eyeglass manufacturers, retail stores, optometrists, and even a vision care insurance company that pays for it all.

In 2017, it added to its product line through a $49 billion merger with French company Essilor.

We’ll break their brands down into those three categories.

Eyewear Brands

Luxottica-owned eyewear brands include the aforementioned Oakley, Ray-Ban, Oliver Peoples, Persol, Costa Del Mar, Eye Safety Systems, Vogue Eyewear, Alain Mikli, Arnette, and Sferoflex.

In addition to its proprietary brands, it also has eyewear licensing deals with a wide slate of fashion houses, including Ralph Lauren, Giorgio Armani, Brooks Brothers, Prada, Chanel, Versace, Coach, Tiffany & Co, Bulgari, Michael Kors, Burberry, Dolce & Gabbana, and more.

Retail Stores and Optometrists

Luxottica also has a large retail footprint that prescribes and sells eyewear. This includes Sunglass Hut, LensCrafters, Pearle Vision, Target Optical, Ray-Ban, Oakley, Glasses.com, EyeMed Vision Care, and Spectacle Hut. It also did Sears Optical when that was a thing.

These retail stores carry mostly Luxottica brands, although they do occasionally carry third-party brands. Because it has a virtual monopoly within its own retail store shelves, it pulled off the Oakley takeover.

Sunglass Hut was one of the only places to get designer sunglasses. So, booting Oakley from stores did effectively strangle them.

Vision Care Insurance

EyeMed Vision Care is more than a brick-and-mortar retailer – it’s the second largest vision insurance company in the United States. It’s estimated that three out of four adults require some form of vision correction.

Corrective lenses make up a sizable share of the market, and sunglasses are the biggest-selling item in this $150 billion market.

Is Luxottica A Publicly Traded Company?

Luxottica is publicly traded, but it voluntarily delisted itself from the New York Stock Exchange in 2017.

This decision was made because the group decided to better service its Italian investor base and save on administrative costs through its merger with Essilor that only added to its market strength.

It also has the effect of freeing it from the regulatory compliance obligations like the Sarbanes-Oxley Act (SOX). SOX audits are the bane of every American company’s existence, as they force financial transparency.

Still – you can invest in EssilorLuxottica through OTC markets under the stock symbol ESLOY. This carries a certain level of risk, especially should the company become insolvent.

Is Luxottica a Fortune 500 Company?

EssilorLuxottica is a Fortune 500 company through its merger with Essilor. It’s also ranked 17th on Fortune’s Change the World list for helping the world’s 6.6 billion visually impaired people find clearer vision by 2050.

The company’s revenue is estimated at $19.61 billion USD, and its investments give it a market capitalization of around $50 billion.

Share prices can be found here.

Now the question is the company a monopoly?

Is Luxottica A Monopoly?

While some estimates put its market share as high as 80 percent, others go as low as 10 percent. It’s difficult to nail down exactly because Luxottica’s competition is either independent optometry practices or conglomerates like Costco (COST) and Walmart (WMT) that don’t break down vision numbers often for the public.

This means that while we know EssilorLuxottica has a large grip on the market, it’s not a pure monopoly. It only monopolizes the products within its own store.

In fact, it has plenty of competition like those mentioned above and even newer company Warby Parker. Warby Parker is also vertically integrated and could be considered the same type of “monopoly” as EssilorLuxottica.

What Type of Monopoly Is Luxottica?

There are three types of monopolies, and Luxottica qualifies as only one of them. First is a natural monopoly that has a high cost to entry that keeps competitors away. A railroad is an example of a natural monopoly because you can’t compete without laying your own rails. Warby Parker’s rise disproves this.

The second type of monopoly is a state monopoly in which the government has full control over a company. Luxottica runs independently of the Italian and French governments.

Finally, there are unnatural monopolies, such as those granted by a patent. This is where Luxottica could be considered a monopoly, because intellectual property is its most important asset. The company flexes design patents on all competitors to keep its designs selling for high markups.

But it’s not the only one doing it – Luxottica has competitors.

Who Are Luxottica Competitors?

Even after merging with Essilor, the combined EssilorLuxottica still has larger competitors. Walmart (WMT) and Costco (COST) alone grew to historic market valuations in spite of the economies globally slowing down. Few people would say you’re a monopoly when competing with these giants.

And Warby Parker is just the start of online competition trouncing Luxottica’s traditional business model. It’s only a matter of time before it faces stiff competition on all fronts and needs to flex its partnerships and cash reserves to stay afloat.

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