Luxury fashion houses Dior and Armani are being probed over allegations they used “Chinese factories” in Italy that underpaid and overworked their staff.
Italy’s competition watchdog AGCM has launched an investigation into possible violations of the consumer code in the way the companies promoted and sold clothing and accessories.
“In both cases, the companies may have issued untrue statements about their ethics and social responsibility, particularly regarding working conditions and compliance with the law by their suppliers,” said AGCM.
The companies allegedly worked with workshops and factories to make certain articles and clothing accessories, employing workers who received inadequate wages, excessive working hours, and poor working conditions.
“In contrast to the production excellence levels, the companies pride themselves where they emphasise ‘craftsmanship and quality’,” added the consumer watchdog.
The investigation includes inspections by the AGCM and the Guardia di Finanza financial police at the headquarters of Giorgio Armani and Christian Dior Italia.
Both companies have denied wrongdoing but pledged to fully cooperate with the authorities.
In a statement, the Armani Group said it believed “the allegations have no merit and is confident of a positive result following the investigation”.
Meanwhile, Dior condemned “in the strongest terms these acts contrary to its values and the code of conduct signed by these suppliers”.
In April, a court placed a unit of Armani under partial judicial administration after finding that one of its suppliers used subcontractors violating labour laws.
The probe comes after Milan prosecutors identified several Chinese-owned firms in Italy who employed Chinese and Pakistani nationals as subcontractors for producing luxury goods for Dior and Armani as systematically abusing their employees, reports Reuters.
Other news reports cited court documents saying that the supplier’s round-the-clock working hours and safety shortcuts allowed it to charge Dior $US58 (53 euros) for a bag that sold for $2844 (2600 euros).
In response to the investigation, Dior – owned by French luxury giant LVMH – condemned “the discovery of illegal practices at two of its suppliers responsible for the partial assembly of men’s leather goods”.
“No new orders would be placed with the suppliers, and teams were working to “strengthen existing procedures,” said Dior.
The company also denied media reports that the suppliers had been making Dior handbags and that “the cost of producing these bags would be ridiculously low”.
“Remember that the profitability margin of the Dior house is entirely in line with the luxury industry,” it added.
Meanwhile, Armani denied the allegations levied by the competition authority but said it would cooperate with the latest investigation.
“The companies involved are fully committed to (cooperating) with the authorities (but) believe that the allegations have no merit and are confident of a positive result following the investigation,” the group told CNN.
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