can be pricey.

For the cost of a single pair, they could pay a month's rent in any

of these one-bedroom apartments, buy a month's worth of food for two

people, or buy a roundtrip flight from New York to Reykjavík, and

still have money to spare. And that's without lenses.

Add the cheapest lenses available and the price jumps by another 200

dollars. Granted, this is the most expensive pair we could find on

the LensCrafters website and we didn't input insurance information.

Still, the average price of glasses in the U.S.

is in the hundreds.

$238 for frames, $113 for lenses, and $201 for an exam.

Insurance can help bring down the cost, but it's still a lot for a

few pieces of plastic.

And they don't have to cost this much.

Recently, two former industry executives revealed to a Los Angeles

Times columnist that quality frames could cost as little as $4

to make, and designer frames a mere $15.

So why the huge markups?

A possible explanation could be the consolidated nature of the

industry.

According to a 2019 IBISWorld report, the top four companies operating

in the U.S.

account for over 60 percent of industry revenue following a decade of

mergers and acquisitions.

The biggest of them, Luxottica, has 40 percent.

The Italian company is the largest maker of eyewear in the world.

In the U.S.,

it captures huge shares of both the prescription eyeglasses and

sunglasses retail market, owns several major retailers, has exclusive

manufacturing and licensing deals with tons of designer labels, and

owns EyeMed, one of the largest vision insurance providers.

A Luxottica spokesperson told CNBC that the glasses industry is very

diverse, including several discount retailers like Walmart and

Costco. This is true.

The same IBISWorld report noted that the vast majority of consumers

prefer value eyewear from such stores.

Still, with such large market shares and diverse holdings, it's worth

examining this one company's power.

And in 2017, Luxottica announced it would get even bigger by merging

with Essilor, a French lenses manufacturer.

The 49 billion dollar deal further consolidated the eyewear industry,

leading some to ask: Will this help consumers or hurt them?

Leonardo Del Vecchio founded Luxottica in Italy in 1961.

The name is a combination of the Italian words for light and optics,

and the company manufactured components and accessories for the

optical industry.

But Del Vecchio soon transformed the company from supplier to

manufacturer. In 1971, Luxottica debuted its first house-made glasses

line. This turned out to be a prescient move.

Starting in the 1980s, glasses slowly transformed from a necessary

medical device to a fashion statement for the face.

Luxottica both drove and capitalized off this trend by partnering

with designer brands to make lines of glasses and sunglasses.

Under these licenses, the fashion houses send inspiration to

Luxottica which designs and manufactures the frames.

The company first partnered with Giorgio Armani in 1988.

Thirty years later, its roster of partnerships sounds like a fashion

week unto itself.

Prada. Chanel.

Burberry. Michael Kors.

Ralph Lauren.

Tiffany. Versace.

Bulgari. And on and on.

Luxottica also purchased several brands outright, like Vogue eyewear,

Ray-Ban, and Oakley, and they moved into retailing, buying

LensCrafters, Sunglass Hut, and Cole National, which is the parent

company of Target Optical, Sears Optical, and Pearle Vision.

In total, Luxottica has about 9000 stores worldwide.

And that's not all.

Their vision insurance company, EyeMed, has a network of 28,000 eye

health professionals and covers 39 million people.

And that's still not all.

We're focusing on the U.S.,

but Luxottica has a major presence in the UK, New Zealand, Australia,

Latin America, and, of course, its native Italy, as well as

manufacturing facilities in the U.S.,

Italy, China, Brazil, and two small plants in Japan and India.

In 2018, Luxottica had net sales of just under nine billion euros.

That's about 10 billion U.S.

dollars and an increase of 22 percent since 2013.

To put it simply: if a brand wants to sell glasses, they want to be

in Luxottica's huge network of stores.

And if a store wants to sell popular brands, they'll want to offer

Luxottica products.

You know Ray-Ban, Chanel, Bulgari and the like.

Some argue that Luxottica's disproportionate size and power stifles

competition, causing the whole industry to stagnate.

The profits in this industry are relatively obscene.

There hasn't been any serious innovation in the industry.

I mean, Google Glass might be the best example, but they're pretty

far from getting into it.

And so this this industry just sort of sits there and it makes a lot

of money and it is stagnant and extracts the cost of billions of

dollars from American and actually just global consumers.

Some competitors have managed to succeed.

Zenni Optical, an online-only glasses retailer, began in 2003 and

sells glasses for as little as $6.95,

lenses included.

Another company, Warby Parker, began selling glasses starting at $95

in 2010.

We each had that frustrating experience of losing a pair of glasses or

breaking a pair of glasses and then not understanding why they cost

several hundred dollars.

Dave left a 700 dollar pair of glasses in the seat pocket of an

airplane. We thought that was just way too much money to spend on a

pair of glasses, technology that's been around about 800 years.

And we looked into the market and saw this massive industry that

really had been overcharging consumers for for decades.

Warby became so popular that it opened its first physical store in

2013, and they've since opened about 90 more.

Companies like Zenni and Warby prove that glasses don't have to be so

expensive. They also drive innovation.

Warby Parker even uses technology that allows consumers to do their

own eye exam using a computer and a phone app.

The company says these prescriptions are reviewed by an eye doctor

within a day, removing an actual eye checkup as a barrier to getting

glasses.

But some optometrists worry that this method oversimplifies

prescriptions and puts consumers at risk of getting a faulty product.

The problem with ordering glasses online always comes down to two

things and that is patient health and patient safety.

And obviously if you can sit down in front of your computer and with

a few keystrokes have a pair of glasses ordered, that is going to

save you time.

But at what expense?

Dr. Pierce told CNBC that some glasses ordered online may not conform

to U.S.

safety standards.

Imagine lenses so thin that they shatter under the slightest

pressure. And one study by the American Optometric Association found

that 29 percent of 154 glasses ordered from online retailers had at

least one lens with an incorrect prescription, a problem that can

lead to headaches, eye strain, dizziness, and more.

The study did not specify from which online retailers the defective

glasses were purchased.

But worse, Dr.

Pierce worries that consumers will take an online prescription as

license to not get regular checkups.

During the course of an eye exam, a lot of things can be revealed that

would otherwise never be detected.

For example, the diagnosis of glaucoma, cataracts, macular

degeneration, even things like dry eye and allergies.

And in very very rare cases, brain tumors have been diagnosed during

the course of an eye exam.

So that's deceiving to consumers to to have the impression that

they've received an eye exam when all they've had is a rudimentary

refraction online to determine refractive error, and even then not

very accurately.

Warby Parker doesn't claim its digital prescription check is a

substitute for an eye health exam.

They even say so in this video that explains the process.

Prescription check is not a comprehensive eye exam and it isn't meant

to replace visits to your eye doctor.

But we do think that telemedicine increases access and can be a great

complement.

Often, incumbents in an industry can be resistant to change or are

scared of it.

At the end of the day, technology is changing.

You can either bury your head in the sand and ignore it or embrace it

and create ways to increase access to health care.

And that's what our hope is.

Dr. Pierce's concerns aren't yet too widespread given that a tiny

percent of glasses overall are purchased online.

The vast majority of consumers buy glasses from large discount chains

like Luxottica's Target or Sears; other walk-in chains like

Luxottica's LensCrafters or Sunglass Hut; or doctor's offices like

one of the 8,000 in Luxottica's EyeMed insurance network.

And since 89 percent of the products sold in Luxottica stores are

manufactured by Luxottica, the odds are even better that you'll buy

frames made by Luxottica — even if they're branded with Chanel,

Tiffany, or Prada.

And Luxottica is about to get even bigger.

The United States Federal Trade Commission approved the merger in

March 2018, but some antitrust experts question if the review was

enough.

And I see these prices and I still think something's wrong in this

market. That competition is not working in the market.

And the idea that you could have a merger that brings together the

largest manufacturer of lenses and the retailer that makes some of

the most best-selling frames, it seems to me that that merger would

be entrenching power.

Professor Fox and her colleague, Scott Hemphill, told CNBC that the

FTC tends to be more sympathetic to vertical mergers — that is,

mergers between two companies at different areas of the supply chain.

In this case, Luxottica makes and sells frames whereas Essilor makes

and sells lenses.

Vertical mergers are a tricky area because, on the one hand, combining

a customer and a supplier can be pro competitive.

It can bring important efficiencies that benefit consumers and

society more generally.

At the same time, vertical mergers under certain circumstances can be

anti-competitive. And so the trick is to figure out which

transactions are anti-competitive and which ones are pro-competitive.

The FTC uses economic models to guess whether a merger will help or

harm consumers — basically, whether prices of the product will go up

or down.

Maybe that analysis is impeccable, but it's very narrow.

And they should at least have considered that the merger might have

prevented the firms from lowering prices.

It might have entrenched the structure that kept competition from

breaking out.

As part of their "A Better Deal" policy proposals, Senate Democrats

condemned the Essilor-Luxottica merger as an example of corporate

consolidation gone too far.

It's worth noting that the eyewear industry in the US was riddled with

accusations of excessive markups and monopolistic behavior long

before Luxottica.

Luxottica has not faced the same scrutiny.

In fact, its merger with Essilor has been approved by trade

commissions around the world.

Its size and markups are not an anomaly, but a modern iteration of

what's long been an industry standard.

Luxottica did not respond to a request for an interview in time, but

a spokesperson did speak with CNBC about the company's methods and

pricing.

The approximately 74 million baby boomers are reaching the years at

which the vast majority of individuals need vision correction.

And Medicare doesn't cover routine eye exams, glasses, or contact

lenses. Maybe their children or grandchildren will cajole them into

trying Zenni Optical or Warby Parker.

If not, Essilor-Luxottica stands to gain quite a bit in the coming

decades.

Everybody doesn't have to buy luxury glasses.

You don't need Ray-Bans.

But there's a lot of room in between where there ought to be

competition and you're not seeing it.