Italy’s luxury brands rocked by sweatshop investigations

A series of investigations into exploitative working conditions among fashion subcontractors has roiled Italy’s luxury industry. The government condemns attacks on “Made in Italy”.

Five fashion brands have been placed under judicial administration since 2024. This followed investigations by the Milan prosecutor’s office. These exposed labor abuses and a lack of oversight in the supply chains of some of Italy’s most respected brands. Lawyers for the Italian luxury leather goods manufacturer Tod’s were last expected in a Milan court on Wednesday. The public prosecutor wants to enforce a temporary ban on advertising and external administrators. She justifies this with so-called “malicious” actions by the company.

The investigations led by prosecutor Paolo Storari have shed a spotlight on the dark side of the luxury industry. It’s about the almost ubiquitous practice of brands outsourcing work to suppliers. They in turn commission other companies. This is happening against a backdrop of ever-tightening margins and little control over working conditions.

So far, the investigation has been directed against the Italian fashion company Loro Piana and Dior’s Italian subsidiary, Manufactures Dior. Giorgio Armani Operations and Alviero Martini are also affected. The public prosecutor’s office has indicated that further investigations could follow.

The Italian government has gone on the offensive. Industry Minister Adolfo Urso said the reputation of Italian brands was “under attack” and proposed a certificate for luxury companies. This is intended to show that they comply with the applicable laws. Critics describe this measure as toothless. It is voluntary and would unduly protect brands from liability.

“We are taking concrete measures to resolutely defend Italian fashion,” Urso said in October. “We want to protect their reputation and the values ​​that have made them synonymous with beauty, quality and authenticity.”

‘Chain of Exploitation’

Prosecutors said last month that Tod’s and three of its executives were “fully aware” of the exploitation of Chinese subcontractors. The brand’s leather loafers can cost over $1,000. Yet the company failed to put systems in place to prevent these practices.

Tod’s allegedly ignored its own audits. These uncovered violations of working hours and wages. Employees were paid just 2.75 euros per hour. There were also violations of safety measures and, according to the prosecutor, “degrading” sleeping areas in the factory. Under Italian law, companies can be held responsible for crimes committed by representatives. These include, for example, approved suppliers who act in your interest.

Advocates for workers in the fashion industry have been pointing out widespread abuses in the supply chain for decades. Suppliers “are at the mercy of big brands who dictate commercial terms,” said Deborah Lucchetti. She is the national coordinator of the Clean Clothes Campaign in Italy. “This starts with prices that are too low to cover all costs.”

This in turn fuels a system in which primary suppliers turn to subcontractors. They are setting increasingly strict conditions. This leads to labor abuse, mostly against migrants. “It is a chain of exploitation,” Lucchetti told AFP.

Italy’s fashion suppliers are predominantly small and medium-sized companies. Tens of thousands of them have closed in recent years, according to industry associations. The reasons are a downturn in the luxury segment and higher production costs. Due to a lack of guaranteed work from the commissioning brands and wafer-thin margins, they are unable to invest. The suppliers remain small. When a large order arrives, they turn to subcontractors for quick help. This system “effectively pushes actors in the supply chain to behave illegally,” Lucchetti said.

Prosecutors said both Tod’s and Loro Piana should have known that one of their main suppliers was outsourcing all of its production. The suppliers do not have any production equipment such as sewing machines in their facility.

The companies affected so far have reacted differently. They broke off relationships with the suppliers, condemned their actions or accused them of hiding grievances.

Reputational risk

Given the reputational risk, some brands have tried to reassure consumers. Last week, Italian luxury fashion house Prada invited journalists to its factory in Scandicci, outside Florence. There the gradual transformation of supple leather into luxury handbags was shown. When asked about the investigations, Prada’s Chief Marketing Officer (CMO) Lorenzo Bertelli commented. He also heads the social responsibility department. He emphasized that production was never a secondary priority for the company.

Other fashion industry executives, Bertelli said, do not see production “as an area of ​​responsibility.” “And that led to many of the things you read in the newspapers.” Prada does not disclose how much of its production is done in-house. However, the company says it is the highest proportion in the industry. Prada owns 25 factories, 23 of which are in Italy.

Bertelli called it a “constant battle” to keep Prada’s supply chain clean. “We constantly have to carry out inspections or checks on suppliers. This is the daily work we do.” (AFP)