Italy's competition watchdog (AGCM) said on Wednesday it had opened an investigation into luxury fashion groups Armani and Dior, opening a new chapter into alleged exploitation of workers in their supply chain, Reuters reports.
The decision comes after authorities found that staff were working under illegal conditions at the factories of four Chinese suppliers. They are based around Milan and employ 32 workers.
According to Reuters, which has seen a copy of the ruling, inspections and checks of electricity consumption data found evidence that staff were working longer hours than they should. This includes working at night and on holidays.
According to the document, some of the staff slept in their work area "under hygienic and health conditions below the minimum required by the ethical approach". In addition, seven of the workers did not have the necessary documents and two were illegal immigrants.
The document also revealed that the Italian-based subsidiary did not take "appropriate measures to verify the actual working conditions or technical capabilities of the contracting companies."
Judicial supervision
The decision by Milan authorities to place the Dior division under judicial administration follows two similar cases this year and is part of a wider crackdown on alleged exploitation in supply chains linked to fashion brands.
In the first case, held in April, the court appointed a special authorized commissioner to manage a subsidiary of Giorgio Armani. The company was accused of failing to properly supervise its suppliers following an investigation into labor exploitation.
Although a special commissioner oversees the operation of the fashion brand's subsidiaries, they will be allowed to operate but are required to resolve any issues identified during the commissioner's tenure.
They were being investigated "for possible illegal conduct in the promotion and sale of clothing items and accessories, in violation of the (Italian) Consumer Code," the statement added.
Tax evasion
The fashion industry is the latest sector to be targeted by Italian prosecutors over the past decade for alleged use of illegal labor recruitment.
According to Reuters, the latest investigation found that a small manufacturer could charge Dior as little as 53 euros to produce a handbag, and then the fashion house could sell the same product in stores for 2600 euros.
Brands that outsource their production to suppliers are required to undertake adequate checks on these operations under Italian law.