The luxury goods makers behind iconic brands including Dior and Armani hired contractors who pay workers as little as $2 an hour to make handbags that they then sell for thousands of dollars each, according to European law enforcement officials.
Dior, the French multinational luxury fashion house headed by tycoon Bernard Arnault and his family, charges a supplier about $57 to produce a handbag that it sells in stores for about $2,780, according to The Wall Street Journal.
Armani, the Milan-based designer, paid a supplier $270 to make the handbags that were then sold on the retail market for just under $2,000, according to the Journal.
Italian authorities obtained the figures after police carried out a series of raids on makeshift workshops and factories that employed illegal immigrants and other “obscures”, the Journal reported.
Prosecutors in Milan accused the companies of hiring subcontractors who employ Chinese immigrants and other foreign workers, who are paid between $2 and $3 an hour.
Workers often sleep in workshops and are forced to work from dusk to dawn, including holidays and weekends, it was claimed.
Last month, Italian judges ordered a subsidiary of Dior, Armanti and Alviero Martini Spa, another luxury fashion maker known for map-printed bags and other items, into receivership after ruling that their manufacturing units mistreated migrant workers.
The Post has sought comment from Dior, Armani and Alviero Martini.
Armani outsources the production of its products to GA Operations, an in-house manufacturing company.
In response to the raids, the fashion house denied wrongdoing by GA Operations, which makes clothing, accessories and home decor for Giorgio Armani Group brands.
“The company has always had control and prevention measures in place to minimize abuses in the supply chain,” Armani’s statement said.
“GA Operations will cooperate with maximum transparency with the competent authorities to clarify its position on this matter.”
According to police, GA Operations hired a subcontractor, who in turn hired unauthorized Chinese subcontractors who employed under-the-table workers, some of whom were in Italy illegally.
They allegedly flouted health and safety rules, as well as rules governing working hours, holidays and days off.
Police said it was part of a caporalato system, the brokering and illegal exploitation of workers more often associated with the agricultural sector.
Four Chinese factory owners face a separate criminal investigation for their role.
Meanwhile, GA Operations is not under investigation but has been placed under judicial administration for up to a year as part of a procedure to ensure legal operations, Carabinieri Lt. Col. Loris Baldassarre said.
A diagram released by police showed the Chinese subcontractor was paid 93 euros ($100) for a handbag that the fashion house sold for around 1,800 euros (about $1,950).
The authorized subcontractor, acting as a middleman but with no real manufacturing capability, was paid €250 for the same bag, pocketing €157 for each bag, police said.
“The system allows for profit maximization (in which) the Chinese factory actually produces the products, reducing labor costs by targeting illegal workers,” police said in a statement.
By postal wire