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. This is the third such decision this year by the Milan court in charge of pre-emptive measures, which in April appointed a commissioner to run a company owned by fashion group Giorgio Armani for “culpably failing” to adequately oversee its suppliers. The investigations come amid increased consumer and investor scrutiny of luxury goods companies’ supply chains.
To reduce reputation risks in recent years fashion labels have curbed the number of sub-contractors and internalized production, hurting for example the Tuscan leather goods industry. Italy is home to thousands of small manufacturers that cover 50 per cent to 55 per cent of the global production of luxury clothing and leather goods, consultancy Bain calculated. The Milan court ordered Manufacturers Dior SRL be placed under judicial administration for one year, a copy of the ruling seen by Reuters showed.
The company will continue to operate during the period. The Dior investigation focused on four Chinese suppliers employing 32 workers in the surroundings of Milan, two of whom were illegal immigrants while another seven worked without the required documentation. The staff lived and worked “in hygiene and health conditions that are below the minimum required by an ethical approach,” the.
