European law enforcement officials say luxury goods manufacturers for big-name brands like Dior and Armani were hiring contractors to make handbags for just $2 an hour and sell them for thousands of dollars a piece.
According to the Wall Street Journal, Dior, the French multinational luxury fashion house chaired by tycoon Bernard Arnault and his family, charges suppliers about $57 to make a handbag that sells for about $2,780 in stores.
According to the Wall Street Journal, Milan-based designer Armani had his suppliers make the handbags for $270 each, then sold them on the retail market for just under $2,000.
Italian authorities obtained the figures after police conducted multiple raids on workshops and makeshift factories employing illegal immigrants and others “informally,” The Wall Street Journal reported.
Milan prosecutors accused the companies of hiring subcontractors who employed Chinese migrants and other foreign workers at wages as low as $2 to $3 an hour.
Workers often reportedly sleep at work and work from dusk to dawn, including on holidays and weekends.
Last month, an Italian court ordered a subsidiary of Dior, Armanti and another luxury fashion company known for its map-printed bags to be placed under judicial receivership after it found its manufacturing plants had mistreated migrant workers.
The Washington Post has reached out to Dior, Armani and Alviero Martini for comment.
Armani outsources the production of its products to its in-house manufacturing company, GA Operations.
In response to the raids, the fashion house denied any wrongdoing by GA Operations, which makes clothing, accessories and home décor for Giorgio Armani Group brands.
“We have always taken control and preventative measures to minimise fraud in our supply chain,” Armani’s statement said.
“GA Operations will work with competent authorities with the utmost transparency to clarify its position on this issue.”
Police said GA Operations hired subcontractors who in turn hired unlicensed Chinese subcontractors who informally employed workers, some of whom were in Italy illegally.
They allegedly ignored health and safety regulations, as well as rules governing working hours, breaks and holidays.
Police said it was part of the Caporalato system, an illegal form of brokering and exploitation of workers most commonly seen in the agricultural sector.
Four Chinese factory owners are facing separate criminal investigations for their roles.
Meanwhile, Operation GA is not the subject of an investigation but will be placed under judicial control for up to a year as part of a procedure to ensure lawful operations, Carabinieri Lieutenant Colonel Loris Baldassarre said.
Drawings released by police showed that for handbags that the fashion house sold for around 1,800 euros ($1,950), Chinese subcontractors were paid 93 euros ($100).
Authorised subcontractors acted as middlemen but had no actual manufacturing capacity and were paid €250 for the same bags, pocketing €157 per bag, police said.
“This system allows Chinese factories to physically produce products and maximise profits by hiring off-the-books and illegal workers, reducing labour costs,” police said in a statement.
With post wire
