The luxury industry’s supply chain has come under increased scrutiny by consumers and investors in recent years. MILAN - An Italian subsidiary of French luxury giant LVMH that makes Dior-branded handbags was placed under court administration on June 10, after a probe alleged it had sub-contracted work to Chinese-owned firms that mistreated workers. This is the third such decision in 2024 by the Milan court in charge of pre-emptive measures, which in April named a commissioner to run a company owned by Giorgio Armani due to accusations that the fashion group was “culpably failing” to adequately oversee its suppliers.
Armani Group said at the time it had always sought to “minimise abuses in the supply chain”. The court said in a copy of the June 10 decision which was seen by Reuters that prosecutors alleged that the violation of rules was not a one-off among fashion companies with manufacturing capacity in Italy, but systematic due to the need to pursue higher profits. “It’s not something sporadic that concerns single production lots, but a generalised and consolidated manufacturing method,” the document said.
The luxury industry’s supply chain has come under increased scrutiny by consumers and investors in recent years. To reduce reputation risks, fashion labels have curbed the number of sub-contractors and internalised production, in a blow to Italy’s leather goods industry, which is mostly based in Tuscany and comprises many firms founded by Chinese immig.