Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EssilorLuxottica faces potential class action for alleged violations of Sherman and Clayton Acts, (Mar 7, 2024)

By Seth Abrams, J.D., M.A.

Putative class action alleged abuse of monopoly power in the premium-branded eyewear market.

An antitrust class action lawsuit has been filed against EssilorLuxottica S.A. and affiliated companies, the largest eyewear provider in the world in the federal district court for the District of Minnesota. The action alleges abuse of monopoly power by EssilorLuxottica through “preventing, delaying, excluding, restraining, or suppressing retail competition in the premium-branded eyewear market within the United States.” This enabled it to enact supra-competitive prices in the premium-branded eyewear market. As a result, plaintiff and the putative class have alleged that they have “paid, and continue to pay, supra-competitive prices for premium-branded eyewear purchased directly from Essilor Luxottica.” Plaintiff alleged overcharges from at least January 1, 2010, until the present which are directly caused by the alleged antitrust violations for which they seek redress (Brown v. Essilorluxottica S.A., March 5, 2024, Menendez, K.).

EssilorLuxottica owns well-known premium eyewear brands such as Oakley, Ray-Ban, Persol, Arnett, and Oliver Peoples. It also owns the largest eyewear retailers in the United States including Target Optical, LensCrafters, Pearle Vision, and Sunglass Hut, as well as several online counterparts. EssilorLuxottica also entered a series of “ultra-long-term, exclusive licensing agreements with fashion houses,” such as Armani Exchange, Brooks Brothers, and Burberry, granting them the exclusive right to “produce, manufacture, and distribute” fashion house premium-branded eyewear. This is alleged to, in practice, given EssilorLuxottica control over retail pricing of these products and enable the establishment of retail price floors that are far above competitive levels. They are also alleged to have used these price coordination clauses in anticompetitive sales agreements with competing manufacturers, such as Gucci and Maui Jim. It also allegedly imposed retail price controls on users of EyeMed, a vision insurance company, and Vision Source, a network of optometrists, regarding premium-branded eyewear. The overall effect is that premium-branded eyewear is not permitted to be sold at prices lower than at EssilorLuxottica’s retail outlets. This “multi-dimensional anticompetitive scheme,” according to the plaintiff, has deprived him and a putative class of meaningful choice to purchase premium-branded eyewear at less than supra-competitive prices. Plaintiff notably alleges that the anticompetitive scheme has allowed EssilorLuxottica to “sustain 1,000 to 5,000 percent retail markups” on premium-branded eyewear, while increasing market share and operating margins.

According to the complaint, EssilorLuxottica controls 80% of the premium-branded eyewear market. To establish this market share, it used anticompetitive means, such as “aggressively acquiring vertical and horizontal competitors, entering into exclusive licensing agreements with [fashion houses], consummating anticompetitive sales agreements with premium-branded eyewear competitors... and entering into anticompetitive distribution agreements with third-party sellers.” It is alleged that EssilorLuxottica possesses monopoly power in the premium-branded eyewear market, relying on evidence that it is able to set retail prices higher than its limited competitors and not lose customers.

Relevant market. According to the complaint, the product market in question is the “market for high-end, designer-brand prescription and non-prescription eyeglasses and sunglasses.” Importantly, this does not include “non-premium” branded mass consumer eyewear. Premium-branded eyewear has several traits differentiating it from non-premium branded eyewear, sold by companies such as America’s Best or Costco. For example, premium-branded eyewear are marketed and sold as highly “desirable fashion accessories that enable self-expression and enhance self-confidence.” The complaint addresses Warby Parker specifically as not meaningfully competing in the premium-branded eyewear market because it sells at close to mass market prices. The plaintiff here alleges that the market is known for its “perceived disassociation from mass consumerism.” Premium-branded eyewear typically costs around $250 but may reach prices as high as $1,000 per pair. This contrasts with mass consumer eyewear, which retails at $100 or under. In addition to non-premium branded mass consumer eyewear, the relevant market also does not include contact lenses.

Proposed class. The putative class is “all persons in the United States who have purchased any of EssilorLuxottica’s Proprietary Brands, Fashion House Licensed Brands, and the brands of premium-Branded Eyewear Competitors... directly from EsillorLuxottica-owned or operated physical or online retail outlets... from January 1, 2010 until the date of trial.” According to the complaint, there are multiple questions of law and fact common to the class, including whether the premium-branded eyewear market constitutes a relevant market and whether EssilorLuxottica possesses monopoly power in this market.

Causes of action. The first cause of action is for monopolization in violation of Section 2 of the Sherman Act. It was alleged that EssilorLuxottica “willfully and intentionally engaged in anticompetitive conduct in order to unlawfully maintain its monopoly” in the premium-branded eyewear market. The second is for exclusive dealing in violation of Section 1 & 2 of the Sherman Act and Section 3 of the Clayton Act. The third is for conspiracy to monopolize in violation of Section 2 of the Sherman Act. The fourth is a claim in the alternative for attempted monopolization, in violation of Section 2 of the Sherman Act. This claim asserts a dangerous probability of success in acquiring monopoly power in the premium-branded eyewear market. The fifth cause of action is another claim in the alternative for agreements to restrain trade in violation of Section 1 of the Sherman Act.

2021 EC action. In March 2021, the EC approved the acquisition of GrandVision for $8.5 billion by EssilorLuxottica. The EC focused on competition concerns that could arise from combining EssilorLuxottica’s strong market position in the wholesale supply of optical products and GrandVision’s leading role in retail for these products throughout the EU. To address the concerns, EssilorLuxottica divested 35 stores in Belgium, 174 stores in Italy, and 142 stores in the Netherlands.

The Case is No. 0:24-cv-00767-KMM-JFD.

Attorneys: Jason D. Gustafson (Throndset & Michenfelder Law Office LLC) for Peter Brown.

Companies: EssilorLuxottica SA

News: Antitrust MinnesotaNews