According to a thorough investigation of subcontractors, two major Italian luxury companies are being called out for paying a minimal amount to produce high-end handbags that are sold for thousands of dollars.
In recent months, Italian prosecutors in Milan looked into the use of third-party suppliers by the LVMH subsidiary Dior. The prosecutors found that these companies were exploiting workers to produce handbags at a significantly lower cost compared to their retail price. Based on documents obtained by authorities, Reuters recently reported that Dior paid a supplier $57 to manufacture handbags that were sold for approximately $2,780. This cost does not include expenses for materials like leather.
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According to a prosecution document cited by Reuters, the Dior department in question did not implement “appropriate measures to check the actual working conditions or the technical capabilities of the contracting companies.”
During investigations conducted in March and April, evidence was discovered that workers were residing in the facility to enable continuous production of handbags, as reported by Reuters. Additionally, electricity consumption data indicated that work was being conducted during nights and holidays. The subcontracting firms involved were Chinese-owned, with prosecutors noting that the majority of the workers were from China, two of whom were living in the country unlawfully and seven were working without proper documentation.
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Furthermore, the probe revealed that safety mechanisms on gluing and brushing machines had been removed to allow workers to operate them at a faster pace. LVMH did not respond immediately to a comment request from Business Insider sent outside regular business hours. According to court documents, Dior had submitted a memorandum highlighting improvements in its supply chain, as reported by The Wall Street Journal on Tuesday.