Dior paid a supplier €53 apiece, roughly $57, to assemble a handbag that it sells in stores for €2,600, or about $2,780, according to documents examined as part of the probe. Armani bags, meanwhile, were sold to a supplier for €93, then resold to Armani for €250, and ultimately priced at around €1,800 in stores, the probe found. The cost prices don’t include leather or other raw materials. The companies separately cover the costs of design, distribution, and marketing.
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.
An investigation by Milan prosecutors into working conditions at local factories found workshops making handbags and other leather goods for Dior and Armani used exploited foreign labor to produce the high-end products at a fraction of their retail.
Inspections by Italian police in March and April found workers subject to “hygiene and health conditions that are below the minimum required by an ethical approach,” the judges wrote in a 34-page court order.
Workers often operated machines from which safety devices had been removed to increase productivity, compromising safety, prosecutors said. Workers also lived, ate, and slept at the workshop. Electricity consumption data indicated that employees worked from dawn until after 9 p.m., including on weekends and holidays.
Investigators interviewed workers who said they were paid as little as €2-€3 an hour to work long days. That wage is far lower than the level stipulated by the collective bargaining agreement covering the sector, the court ruling said.
Prosecutors claimed in the papers submitted to the court that the Chinese-owned firms were the subcontractors and most of the workers were from China. Seven of these Chinese workers did not have required documentation and two were living in the country illegally.
