MILAN -An Italian subsidiary of French luxury giant LVMH that makes Dior-branded handbags was placed under court administration on Monday, after a probe alleged it had sub-contracted work to Chinese-owned firms that mistreated workers.
The investigations come amid increased consumer and investor scrutiny of the luxury industry's supply chain. To reduce reputation risks in recent years fashion labels have curbed the number of sub-contractors and internalised production, hurting for example Italy's leather goods industry which is based in Tuscany.
Between March and April, Italian police carried out inspections at the suppliers, named Pelletteria Elisabetta Yang SRL, New Leather Italy SRLS, AZ Operations SRLS, Albertario Milano SRL, the document said. Delphine Arnault is chair and CEO of Dior, LVMH's second largest fashion label. She is the eldest child of Bernard Arnault, who runs the LVMH empire and is among the world's wealthiest people. The Arnault family controls a 42% stake in LVMH.In the 34-page ruling, the judges said the workers were made to sleep in the workplace in order to have"manpower available 24 hours a day".
This allowed contractors to rein in costs and charge Dior as little as 53 euros to supply a handbag, the document said, citing as an example the Dior PO312YKY model, which the fashion house then retailed in shops at 2,600 euros.