Italian Prosecutors Probe Supply Chain of Around a Dozen Fashion Brands

This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district,  Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)
This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district, Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)
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Italian Prosecutors Probe Supply Chain of Around a Dozen Fashion Brands

This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district,  Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)
This photograph shows Milan's skyline with the Unicredit Tower (CL) next to "Bosco Verticale" (Vertical Forest) residential tower (C), Unipol Tower (2R) at Porta Nuova district, Milan, on June 6, 2024. (Photo by GABRIEL BOUYS / AFP)

Prosecutors in Milan are investigating the supply chain of around a dozen more fashion brands, a person with knowledge of the matter said, after a unit of France's LVMH in Italy was placed under court administration in a worker exploitation probe.
On Monday, a Milan court appointed a commissioner to run an LVMH-owned maker of Dior-branded handbags after an investigation into four of its suppliers based in the surroundings of Italy's fashion capital uncovered illegal working conditions for staff.
On-site inspections and checks on electricity usage data led prosecutors to allege workers were employed for extended hours, working often into the night and during holidays. Some of the staff slept where they worked, had no regular contracts, with two having illegally immigrated into Italy.
This is the third such decision this year by the Milan court in charge of pre-emptive measures, which in April took similar steps in relation to a company owned by Giorgio Armani due to accusations the fashion group was "culpably failing" to properly oversee its suppliers. Armani Group said at the time it had always sought to "minimize abuses in the supply chain".
LVMH on Monday declined to comment on the court's decision.
Milan prosecutors and Italian police are investigating further small manufacturers that supply around a dozen other brands, the person told Reuters, declining to provide additional details because the information is confidential.
The appointment of a special commissioner is intended to give the fashion brands' subsidiaries time to fix problems in their supply chain while continuing to operate.
Neither LVMH nor Armani are under investigation, while the suppliers targeted by the probe face accusations of worker exploitation, copies of the court decisions seen by Reuters showed.
'MADE IN ITALY'
Milan prosecutors have been investigating for the past decade recruitment firms that allegedly illegally employed workers, evading taxes, as well as welfare and pension contributions, to slash the cost of the services they supplied.
The probes traditionally targeted sectors such as logistics, transportation and cleaning services, where workers were supplied by firms that sprung up and were wound down every couple of years.
The focus then shifted onto the fashion sector, where probes have highlighted similar problems this year.
Italy accounts for 50% to 55% of the global luxury goods production, consultancy Bain calculated, with thousands of small manufacturers supplying big brands and allowing them to sport the prized 'Made in Italy' label on their goods.
The latest Milan investigation has shown a small manufacturer was able to charge Dior as little as 53 euros ($57) to make a handbag, which the fashion house then sold in shops at 2,600 euros.
Under Italian law, brands outsourcing production are responsible for carrying out adequate checks on suppliers.
In the past, the measures taken by Italian magistrates in relation to worker exploitation probes concerned only the suppliers who mistreated workers.
However, Milan prosecutors have been able to make use of a provision in the law that was originally designed to deal with companies infiltrated by the Mob.
These companies would be placed under court, or judicial, administration through the appointment of special commissioners to run them.



Italy's Antitrust Body Closes Dior Probe with Pledges to Fund Fight Against Labor Exploitation

FILED - 30 September 2021, Berlin: The Dior logo is pictured on the wall at KaDeWe in Berlin. Photo: Gerald Matzka/dpa
FILED - 30 September 2021, Berlin: The Dior logo is pictured on the wall at KaDeWe in Berlin. Photo: Gerald Matzka/dpa
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Italy's Antitrust Body Closes Dior Probe with Pledges to Fund Fight Against Labor Exploitation

FILED - 30 September 2021, Berlin: The Dior logo is pictured on the wall at KaDeWe in Berlin. Photo: Gerald Matzka/dpa
FILED - 30 September 2021, Berlin: The Dior logo is pictured on the wall at KaDeWe in Berlin. Photo: Gerald Matzka/dpa

Italy's antitrust body has closed its investigation into whether LVMH-owned Dior and two of its units misled consumers with their statements about working conditions at its suppliers, saying the firm had made pledges though no wrongdoing was found.

Dior's commitments include paying 2 million euros ($2.3 million) over five years to support initiatives, open also to other brands, aimed at helping victims of labor exploitation, Reuters reported.

Dior also committed to making changes to its ethical and social responsibility statements and to adopt stricter procedures to select and monitor suppliers, the authority said on Wednesday.

Last year prosecutors in Milan uncovered workshops where underpaid workers, often immigrants who were in the country illegally, produced leather bags then sold to Dior and Armani for a tiny fraction of their retail price.

This led Italy's antitrust investigation to open an investigation into whether the luxury brands had misled consumers.

Italy's antitrust authority said it was focusing on the discrepancies between the reality uncovered by the judicial labor probes and the messages from brands to consumers in terms of craftsmanship and corporate social responsibility.

Last year prosecutors appointed commissioners to oversee Dior and Armani's units that outsourced the handbag production to ensure they fix their supply chain problems. The special administration regime was lifted earlier this year.

Last week, an Italian court placed a unit of fashion brand Valentino under judicial administration for a year after uncovering worker abuse inside its supply chain, in the latest in a string of cases that have tainted the image of luxury brands.