Italian prosecutors in Milan investigated the LVMH subsidiary Dior and Armani’s use of third-party suppliers in recent months. They found that these luxury giants exploited workers to churn out bags for a small fraction of their store price. Dior pays a mere $57 per handbag to its suppliers, which it then sells in stores for $2,780 as per reports. The costs do not include raw materials such as leather.
The relevant unit of Dior didn't adopt "appropriate measures to check the actual working conditions or the technical capabilities of the contracting companies" according to a prosecution document.
Similarly, Armani also faces scrutiny for exploiting labour in Italy, paying suppliers $99 for handbags resold at $1,900 respectively. Investigations revealed a system of abuse and exploitation of the workers of third-party subcontractors in the companies’ supply chain.
Workers forced to work under terrible conditions
Talking more about the workers’ condition, in probes through March and April, investigators found evidence that workers were sleeping in the facility so bags could be produced around the clock, Reuters reported. They also tracked electricity-consumption data, which showed work was being carried out during nights and holidays, the report said. The investigation also revealed that safety devices on gluing and brushing machines were removed so workers could operate them faster.
Workers forced to work under terrible conditions
Talking more about the workers’ condition, in probes through March and April, investigators found evidence that workers were sleeping in the facility so bags could be produced around the clock, according to a Reuters report. They also checked the consumption of electricity in the factories, which showed work was being carried out during nights and holidays, the report said. The investigation also revealed that safety devices on gluing and brushing machines were removed so workers could operate them faster.
Luxury giants put under judicial administration
Judges in Milan have ordered units of both companies to be placed under judicial administration for one year. They have been placed 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.
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 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.