ROME, July 18 — Italy’s competition watchdog launched an investigation yesterday into luxury fashion groups Armani and Dior for unfair commercial practices over allegations they used suppliers that underpaid and overworked their staff.
As part of the probe, the AGCM watchdog and the Guardia di Finanza financial police on Tuesday carried out inspections at the headquarters of Giorgio Armani SpA and G.A. Operations SpA as well as Christian Dior Italia Srl.
The investigation comes after units of Armani and Dior were separately placed under judicial administration earlier this year following concerns over labour law violations by subcontractors.
Both groups said they would cooperate with authorities but denied wrongdoing.
In a statement, the Armani group said it believed “the allegations have no merit and are confident of a positive result following the investigation”.
Dior, meanwhile, said it condemned “in the strongest terms these acts contrary to its values and the code of conduct signed by these suppliers”.
The competition watchdog said it had opened an investigation into the Armani and Dior group companies over possible violations of the consumer code in the way the companies promoted and sold clothes and accessories.
“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,” it said.
It noted that the companies “emphasised craftsmanship and quality”.
“However, in order to make certain articles and clothing accessories the companies allegedly used supplies from workshops and factories employing workers who would receive inadequate wages,” it added.
“In addition, such workers would work hours in excess of the legal limits and in inadequate health and safety conditions, in contrast to the production excellence levels the companies pride themselves.”
‘Chinese factories’
In April, an Italian court placed a unit of Armani under partial judicial administration for one year after it found one of its suppliers used subcontractors that violated labour laws.
Giorgio Armani Operations — a company wholly owned by Giorgio Armani, which deals with the design and production of the label’s clothes and accessories — was not itself accused of wrongdoing.
But the court said one of its suppliers subcontracted production in the Milan area to what it called “Chinese workshops” mainly employing Chinese and Pakistan nationals in exploitative conditions.
Armani said at the time that it was fully cooperating with authorities and had “always had control and prevention measures in place to minimise abuses in the supply chain”.
In June, a Milan court ordered that another top fashion company be placed under judicial administration, for what police said was a failure to prevent labour exploitation within its supply chain.
The company was widely reported to be Manufactures Dior Srl, a unit of Christian Dior Italia.
According to a police statement at the time, an investigation identified suppliers described as “Chinese factories, which managed to reduce costs by resorting to the use of irregular and illegal workers in exploitative conditions”.
Four such factories were checked, with seven people found without correct documents and two who were in Italy illegally, police said.
‘Strengthening procedures’
In response to Wednesday’s investigation, Dior — which is owned by French luxury giant LVMH — said it condemned “the discovery of illegal practices at two of its suppliers responsible for the partial assembly of men’s leather goods”.
In a lengthy statement, it said no new orders would be placed with the suppliers, and that teams were working to “strengthen existing procedures” given that the suppliers had “clearly succeeded in concealing these practices, despite regular audits...”
It 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 said.
News reports had cited court documents saying that the supplier’s around-the-clock working hours and safety shortcuts allowed it to charge Dior €53 (RM270) for a bag that retailed for €2,600 (RM13,258).
The court documents cited by media said the practices discovered were not a one-off phenomenon but represented “a generalised and consolidated production system.” — AFP
