Luxury goods makers behind iconic brands including Dior and Armani hired contractors that pay workers as little as $2 an hour to make handbags that they then sell for thousands of dollars apiece, according to European law enforcement officials.
Dior, the French multinational luxury fashion house chaired by mogul Bernard Arnault and his family, charges a supplier around $57 to manufacture a handbag that it sells in stores for around $2,780, according to The Wall Street Journal.
Armani, the Milan-based designer, paid $270 to a supplier to make 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 conducted a series of raids on workshops and makeshift factories that employed illegal immigrants and others “off the book,” the Journal reported.
Prosecutors in Milan accused the companies of hiring subcontractors that employ Chinese migrants and other foreign workers who are paid as little as between $2 and $3 an hour.
The workers often sleep in the workshops and are made to work from dusk until dawn, including on holidays and weekends, it was alleged.
Last month, Italian judges ordered a subsidiary of Dior, Armanti and Alviero Martini Spa, another luxury fashion maker known for map-print bags and other items, to be placed under court administration after ruling that their manufacturing units mistreated migrant workers.
The Post has sought comment from Dior, Armani and Alviero Martini.
Armani outsources manufacturing of its products to GA Operations, an in-house production company.
In response to the raids, the fashion house denied wrongdoing by GA Operations, which produces apparel, accessories and home decor for the Giorgio Armani Group brands.
“The company has always had control and prevention measures in place to minimize abuses in the supply chain,’’ the Armani statement said.
“GA Operations will collaborate with the utmost transparency with the competent bodies to clarify its position on the matter.”
According to police, GA Operations hired a subcontractor, which in turn hired unauthorized Chinese subcontractors that employed workers under the table, some of whom were in Italy illegally.
They allegedly disregarded health and safety regulations as well as rules governing working hours, breaks and days off.
Police said it was part of a system of caporalato, the illegal intermediation and exploitation of workers most often associated with the agricultural sector.
Four Chinese factory owners face a separate criminal investigation for their role.
GA Operations, meanwhile, 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, said Carabinieri Lt. Col. Loris Baldassarre.
A diagram released by police indicated that the Chinese subcontractor was paid 93 euros ($100) for a handbag that the fashion house sold for around 1,800 euros (around $1950).
The authorized subcontractor, acting as the middleman but without real production capabilities, was paid 250 euros for the same bag, pocketing 157 euros for each bag, police said.
“The system allows for maximizing profits (in which) the Chinese factory actually produces the products, lowering labor costs by resorting to off-the-books and illegal workers,” police said in a statement.
With Post wires
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