ZeroHedge reported that Italian prosecutors investigated the local supply chains of two major fashion houses in the country – Dior and Giorgio Armani. Their probe found that some designer handbags are made by migrants, who are underpaid and overworked. The Wall Street Journal (WSJ) also expounded on the probe in a separate report.
The WSJ cited court documents showing Dior, a subsidiary of French luxury conglomerate Louis Vuitton Moet Hennessy (LVMH), had paid a supplier about $57 to assemble luxury handbags. These bags were then sold for $2,780 in brick-and-mortar retail ships.
Meanwhile, Giorgio Armani bags were sold to local suppliers for around $100, then resold to Armani for $270. These were ultimately placed on retail stores for $1,945 or more.
"The cost prices don't include leather or other raw materials," WSJ noted. "The companies separately cover the costs of design, distribution and marketing."
Luxury bags are made in sweatshops that employ low-cost Chinese labor
Some of the luxury handbags made by the fashion houses' suppliers with the "Made in Italy" stamp are indeed true to the label. Prosecutors allege, however, that these bags are actually made in sweatshops within the country that employ low-cost Chinese labor. They say many of the sweatshops fall extremely short of legal workshop codes.
Fabio Roia, president of Milan's court system, remarked: "Why does it cost so little to manufacture the product? The brands need to ask themselves this question."
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The probe on Dior began in March and focused on four factories – AZ Operations, New Leather Italy, Davide Albertario Milano and Pelletteria Elisabetta Yang. All four employed 32 workers on their facilities located on the outskirts of Milan. But two of the 32 workers were in Italy illegally and seven of them were without official documentation. (Related: German police cracking down on "foreigners out" chant as public turns against mass illegal immigration.)
According to a 34-page ruling issued by Milan's court system, the first and second factories were subcontractors while the third and fourth factories were direct suppliers to Manufactures Dior SRL – a unit of the main Dior company under LVMH. All four factories were suspended.
The same court order stated that Italian police found migrant workers in "hygiene and health conditions that are below the minimum required by an ethical approach" at the four factories. As a result, Manufactures Dior SRL was placed under court administration for a year. The company will still be allowed to make Dior-branded handbags during the time, albeit under the oversight of a special commissioner.
Meanwhile, Giorgio Armani was put under court administration in April over the same claims. Prosecutors accused the luxury fashion house of failing to prevent human rights violations in their supply chains.
Investigators interviewed workers from one of Armani's subsidiaries, GA Operations, which hired several Chinese-owned subcontractors across Italy. These subcontractors paid migrant workers a few euros per hour.
"The main problem is obviously people being mistreated: applying labor laws, so health and safety, hours, pay," Roia told Reuters earlier this year.
Dior declined to respond to a request for comment sent by the WSJ. In contrast, Armani said it had "control and prevention measures in place to minimize abuses in the supply chain." It also reiterated that it was "collaborating with the utmost transparency" with Italian authorities.
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