Dior And Armani: Luxury Brands' Labour Exploitation Probe
It seems the glamorous world of Milan has story of exploitation to tell the world. A series of raids in Italy revealed that the ace luxury brands are paying very small price to subcontractors to produce handbags, while its retail prices are high.
As per the investigation conducted by the Italian prosecutors, the local factories that makes handbags and leather goods for Dior and Giorgio Armani have been found to exploit foreign labour, using them to produce high-end products at a fragment of their retail prices, the Wall Street Journal (WSJ) reports.
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The probe found out that Dior only pays €53 per handbag to its suppliers, though it sells in stores for €2,600; similarly, Armani’s bags, which at first bought for €93 from suppliers, are resold to the brand for €250 and later it priced around €1,800 in stores. The report adds that these prices exclude expenses for leather, and expenditures involved in design, distribution, and marketing.
Italian prosecutors have criticised the luxury brands for their failure to supervise their supply chain. Though these companies do not have to bear any costs related to these findings, some of the independently owned suppliers could have to face charges for exploitation of workers and enrolling them even without proper documentation.
In the 34-page court order, the prosecutors list the exploitations, including workers being made to sleep in the workplace and the removal of safety devices from the machinery for faster operation. Also, the electricity consumption record denoted that employees generally worked from morning until after 9 p.m., and it includes weekends and holidays as well.
In recent years, the supply chain of luxury brands has come under increased scrutiny by consumers and investors to ameliorate reputation issues. Thereby, the luxury industry has restrained, firstly, the number of sub-contractors, and secondly, it has internalised production, resulting in a massive blow to the leather goods industry, which is mostly based in Tuscany and involves many firms founded by Chinese immigrants, Reuters reports.
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The Milan court have taken judicial action against Manufactures Dior SRL and Armani and have been placed both under judicial administration for a period of one year. These legal interventions, as per live mint report, typically used for companies infiltrated by organized crime, appoint special administrators to oversee operations and monitor progress in resolving issues.
Though Dior did not comment on the report, Armani said it had “control and prevention measures in place to minimize abuses in the supply chain” and associating with authorities with the “utmost transparency,” the WSJ reports.
