The Dark Side of Luxury: Milan Probe Reveals Worker Exploitation in Handbag Factories

Marrakech – A series of raids conducted by Italian authorities have revealed a stark contrast between the glitzy facade of Milan’s fashion industry and the harsh realities faced by some workers producing luxury goods.

An investigation by Milan prosecutors found that workshops making handbags and other leather goods for high-end brands like Dior and Armani were using exploited foreign labor. Many of these laborers were identified as Chinese migrants, who were facing brutal conditions manufacturing the products at a fraction of their retail price.

According to documents examined as part of the probe and reported by the Wall Street Journal, Dior paid a supplier around €53 ($57) to assemble a handbag that retails for €2,600 ($2,780).

Similarly, Armani bags were sold to a supplier for €93 ($100), then resold to Armani for €250 ($268), and ultimately priced at around €1,800 ($1,926) in stores.

These cost prices do not include raw materials like leather, and the brands cover additional expenses such as design, distribution, and marketing separately.

The court rulings stemming from the investigation criticized the luxury companies for failing to adequately monitor their supply chains.

While the brands themselves do not face charges related to these findings, some of the independently owned suppliers could face charges for worker exploitation and employing workers without proper documentation.

Inspections by Italian police in March and April found workers subjected to substandard hygiene and health conditions. Safety devices on machines were often removed to increase productivity at the cost of the workers’ wellbeing.

Many employees lived, ate, and slept at the workshops, working long hours from dawn until late evening, including weekends and holidays, for wages as low as €2-€3 ($2-$3) per hour—far below the level stipulated by collective bargaining agreements in the sector.

The investigation highlights the challenges faced by luxury brands that have kept production close to home, believing it crucial to their appeal, while often outsourcing manufacturing to suppliers.

Much of this production takes place in Italy, which is responsible for 50% to 55% of the world’s luxury clothing and leather goods, according to consulting firm Bain.

As a result of the probe, Dior, Armani, and Alviero Martini have been placed under court administration — a legal provision originally intended to monitor companies infiltrated by organized crime.

Special commissioners will oversee operations and report to the court on the companies’ progress in resolving these issues.

Fabio Roia, president of Milan’s court system, emphasized the need for brands to take responsibility for their entire supply chain to prevent worker exploitation.

Roia is working on a proposed program for fashion brands to strengthen checks on suppliers, stating, “That’s the only way we can stop this system that leads to the exploitation of workers,” he said.

The findings of this investigation may give pause to consumers who have driven the recent luxury boom, as the use of allegedly unethical labor practices in the production of high-end items could be a significant deterrent, especially as brands continue to raise prices.