Dior Subsidiary Under Administration After Italian Labor Probe

Jasmin Malik Chua
Tue, Jun 11, 2024


First it was Alviero Martini, then a company belonging to Giorgio Armani. Now, one of Christian Dior’s Italian subsidiaries stands accused of working with Chinese-owned companies that exploited and mistreated workers, plunging the once-unimpeachable ethics of “made in Italy” luxury into further doubt.

And not just accused, either. On Monday, a Milanese court ordered that Manufacturers Dior be placed under judicial administration for one year, similar to Giorgio Armani Operations in April and Alviero Martini in January. Like GAO and Alviero Martini, which prosecutors said failed to prevent human rights violations in their supply chains, Manufacturers Dior did not take “appropriate measures to verify the actual working conditions or the technical capabilities of the contracting companies,” the ruling said. The company will still be allowed to make Dior-branded handbags during the time, albeit under the oversight of a special commissioner.

LVMH Moët Hennessy Louis Vuitton, the French conglomerate that owns Christian Dior, did not respond to a request for comment. LVMH shares tumbled 4 percent in the aftermath of the court’s decision, rallied later in the day, then fell by 4.5 percent from its June 7 close on Tuesday afternoon.

The Dior investigation, which began in March, focused on four factories—AZ Operations, Davide Albertario Milano, New Leather Italy and Pelletteria Elisabetta Yang, now all suspended—that together employed 32 workers on the outskirts of Milan, two of whom were in Italy illegally and seven without official documentation. Only two of the facilities were subcontractors; Davide Albertario Milan and Pelletteria Elisabetta Yang were Manufacturers Dior’s direct suppliers, the ruling said.

So-called “backdoor globalism” has brought waves of Chinese immigrants that have set up shop in Italy’s textile strongholds, including the Tuscan city of Prato, which is colloquially known as “Little China” for boasting one of Europe’s largest Chinese populations. The Chinese-run businesses have outcompeted their native Italian counterparts in terms of speed, productivity and price, though some of that success appears to have come at the cost of labor and workplace standards that margin-sensitive buyers may be willing to overlook—or at least not interrogate too much—particularly if subcontracting is involved. “Made in Italy” only requires that a product is planned, manufactured and packed in the country; it doesn’t specify by whose hands or under what conditions they’re made.

Prosecutors said that the workers earned less than the legal minimum wage while operating dangerously overclocked machines in “hygiene and health conditions that are below the minimum required by an ethical approach.” They were also made to sleep in the factories so they could be available 24 hours a day, a claim that was backed up by electricity consumption data that revealed “seamless day-night production cycles, including during the holiday.”

All of this allowed the suppliers to charge Dior as little as 53 euros ($57) per handbag, the ruling said, or a fraction of the $9,500 the high-end label can charge. LVMH doesn’t break down profits by brand, though Dior is among its most valuable. The entire group recorded 86.2 billion euros ($92.6 billion) in revenues in 2023, a 13 percent uptick from the year before.

While Dior doesn’t face criminal charges, it failed to adopt “appropriate measures to check the actual working conditions or the technical capabilities of the contracting companies,” the court said. Italian law requires brands outsourcing production to perform their due diligence on suppliers.