Milan prosecutors recently raided luxury goods production in Italy and exposed the realities behind the outward glamour of luxury brands such as Dior, owned by Paris-based LVMH, and Armani, owned by Giorgio Armani.
A Milan court criticized the companies for inadequate supervision of their supply chain. Prosecutors found appalling conditions, low wages, and undocumented migrants working in the workshops that produced these highly-priced luxury goods.
According to European law enforcement officials, Dior and Armani’s contractors paid workers wages of approximately $2 to $3 per hour to make handbags, according to a report in the Wall Street Journal. These luxury bags were sold for a couple of thousands of dollars.
The WSJ, which broke the wages news, said that Paris, France-based parent Louis Vuitton, which owns the Dior brand, charges a supplier around $57 to manufacture a handbag. Dior then sells it for approximately $2,750.
According to Forbes, Bernard Arnault, generally among the top three billionaires in the world, is the chairman of LVMH, and his family owns the most significant number of shares.
According to the WSJ, Milan-based design house Giorgio Armani pays $270 to a supplier to make handbags under the Armani brand. These handbags have a retail value of less than $2,000.
The prosecutors said that these companies hired subcontractors who used undocumented migrants from China and other countries who were paid “off the books,” according to the outlet, and who allegedly slept in the workshops and worked from dawn to dusk, even on holidays.
Earlier, CWEB and other outlets reported that Dior, Armani, and Alviero Martini Spa subsidiaries had been placed under court administration.
A police statement about the contracting and subsequent subcontracting said, “The system allows for maximizing profits (in which) the Chinese factory produces the products, lowering labor by resorting to off-the-books and illegal workers.”
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