A series of raids in Italy has starkly exposed the disparity between the glamorous facade of Milan’s fashion world and the harsh realities of luxury goods production.
The Wall Street Journal reported that according to an investigation by Milan prosecutors, local factories that manufacture handbags and leather goods for Dior and Armani have been found to exploit foreign labour, using them to produce high-end products at a fraction of their retail prices.
Documents reviewed as part of the probe reveal shocking details: Dior pays a mere €53 per handbag to its suppliers, which it then sells in stores for €2,600, while Armani’s bags, initially bought for €93 from suppliers, are resold to the brand for €250 and subsequently priced around €1,800 in stores. These costs exclude expenses for materials like leather, with additional expenditures covered separately for design, distribution, and marketing.
The investigations further revealed that some of these factories, all located in Italy, also manufacture goods for other renowned fashion labels.
Prosecutors have criticized the luxury companies for failing to oversee their supply chain. However, the companies do not face charges related to these findings. Some of the independently owned suppliers could face charges for worker exploitation and employing workers without proper documentation.
Dior, owned by luxury giant LVMH, did not comment on the report. However, Armani said it had “control and prevention measures in place to minimize abuses in the supply chain” and was “collaborating with the utmost transparency” with authorities, the WSJ report said.
According to consulting firm Bain, Italy, which hosts thousands of small manufacturers, remains a hub for producing luxury clothing and leather goods, generating 50 per cent to 55 per cent of global output.
In response to these revelations, judicial measures have been taken against companies like Manufactures Dior SRL and Armani, placing them under court administration due to their involvement with Chinese-owned firms accused of mistreating migrant workers
These legal interventions, typically used for companies infiltrated by organized crime, appoint special administrators to oversee operations and monitor progress in resolving issues. Alviero Martini, also implicated, expressed surprise and concern over findings that some of its suppliers had illicitly subcontracted production without its knowledge, citing the sector’s complex and fragmented production chains as a challenge to direct oversight.
The court ruling on Dior focused on four Milan-area companies in the supply chain, two of which directly supplied the brand. The workshops producing the goods employed dozens of workers, including at least two illegal immigrants and seven who were employed off the books, the WSJ report stated.
The report said inspections by Italian police in March and April found workers subject to “hygiene and health conditions that are below the minimum required by an ethical approach.” The judges wrote in a 34-page court order.
According to the report, workers usually operated machines from which safety devices had been removed to increase productivity, compromising safety. Workers also lived at the workshop. Electricity consumption data indicated that employees typically worked from dawn until after 9 p.m., including on weekends and holidays.
The court ruling against Armani shows how one of its subsidiaries, GA Operations, hired two subcontractors, which in turn hired several Chinese-owned subcontractors in Italy. Investigators interviewed workers who said they were paid as little as 2 to 3 euros an hour to work long days, far lower than collective bargaining agreements in the sector.