Milan court places Dior subsidiary under administration amid workers’ rights probe

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18th June 2024 – (Milan) An Italian subsidiary of French luxury conglomerate LVMH, known for producing Dior-branded handbags, has been placed under judicial administration. This decision followed a Milan court’s investigations into allegations that the company subcontracted work to Chinese-owned businesses accused of worker mistreatment.

This marks the third such intervention by the Milan court this year, following a similar action against a Giorgio Armani owned company in April. The court’s ongoing scrutiny underscores a broader issue within Italy’s luxury goods industry, where systemic exploitation has been noted as companies push for higher profit margins.

According to documents reviewed, the court highlighted that these are not isolated incidents but rather a widespread practice across the sector. The issue is particularly poignant given Italy’s role as a central hub for luxury manufacturing, with small to medium-sized enterprises, many owned by Chinese immigrants, forming the backbone of the industry.

Manufactures Dior SRL, a subsidiary fully owned by Christian Dior Italia SRL, will remain operational but under the court’s oversight for one year. The probe zeroed in on four suppliers around Milan employing a workforce of 32, some of whom were found to be working illegally in the country.

Inspections conducted between March and April unearthed severe violations of labour laws, including unacceptable working and living conditions. The court’s findings painted a grim picture of workers forced to live at their workplaces to facilitate round-the-clock production, with essential safety measures on machinery notably compromised to increase output.

The court’s documentation revealed that such conditions allowed these suppliers to drastically cut costs, charging Dior as little as €53 per handbag, a stark contrast to the retail prices, which could soar to €2,600.

Despite the severity of these findings, Dior itself has not been subjected to a criminal investigation, though the owners of the subcontracting firms are facing scrutiny. This situation mirrors the earlier findings from the Armani Group probe, which also implicated Chinese-owned manufacturers in Italy for similar legal infringements.

The fashion industry, particularly in luxury sectors, has been attempting to mitigate reputational risks by reducing subcontractors and bringing more production processes in-house. However, these recent cases indicate that significant challenges remain, particularly in ensuring ethical practices are upheld throughout the supply chain.