Italy Hits Dior and Armani with Antitrust Probe over Working Conditions

If you want to sell handbags for thousands of dollars apiece, your workers better be living la dolce vita.

Italy’s antitrust agency, the Authority for the Guarantee of Competition and the Market (AGCM), announced on Wednesday that it’s opened an investigation into iconic luxury fashion houses Dior and Armani over allegations of worker exploitation.

Made in Chitaly 

Earlier this month, an investigation from prosecutors in Milan led to a series of police raids on warehouses belonging to Dior and Armani suppliers. The raids exposed the unbelievable markups brands were putting on their “made in Italy” items. In Dior’s case, it paid $57 to make handbags that retail for $2,780. That’s a 4,777% markup, for anyone counting. Investigators found that workers, many of whom were Chinese immigrants, were kept in illegal conditions, working long hours in an unsafe and unhygienic environment. 

Armani and Dior each had their supplier units placed under judicial administration, and now the AGCM has picked up the baton, framing the exorbitant markups and workplace conditions as an ESG (environmental, social and governance) violation:

• “In both cases, the companies may have issued untrue statements about their ethics and social responsibility, in particular with regard to working conditions and compliance with the law by their suppliers,” the AGCM said in a statement. It added they may have breached the country’s “consumer code,” making this a consumer rights as well as a workers’ rights issue.
• The companies’ roles as luxury brands is a factor in the agency’s investigation, as it said they “emphasized craftsmanship and quality” while allegedly subjecting workers to low wages and illegally long hours.

An AGCM spokesman told The Daily Upside that if found guilty, the companies would be liable for a €10 million ($11 million) fine. That’s pretty manageable seeing as Dior’s parent company, LVMH, is worth €346 billion ($378 billion), but it has the more sinister potential to deeply tarnish the most valuable thing Dior and Armani possess — their brands.

J’adore Les Jeux: Although Dior might be headed for a regulatory and PR nightmare in Italy, in its home country it’s about to go on a marketing spree. LVMH, the luxury conglomerate that owns Dior, has spent €150 million ($164 million) to be the biggest sponsor at this year’s Olympics in Paris. CEO Bernard Arnault, currently the world’s third-richest person according to the Bloomberg Billionaires Index, is set to kick things off with an exclusive pre-opening ceremony event.