Luxury giant LVMH's Italian subsidiary under investigation over labour exploitation

French luxury giant LVMH's subsidiary has been placed under court administration in Italy over labour law exploitation.

According to a report by Reuters, a probe alleged that LVMH's Italian unit had sub-contracted work to Chinese-owned firms that exploited workers.

The probe has emerged amid the increased consumer and investor scrutiny of luxury goods companies' supply chains.

The Milan court has ordered Manufacturers Dior SRL to be placed under judicial administration for one year, as per Reuters, but the company will continue to operate during this period.

Italy is home to numerous small manufacturers that cover 50% to 55% of the global production of luxury clothing and leather goods as per Bain consultancy.

However, Milan prosecutors have increased probe of the owners of the contracting and subcontracting companies for exploiting workers and employing people off the books.

The current investigation focused on four Chinese suppliers employing 32 workers in the Milan region. The global news agency reported that two of the manufacturers were illegal immigrants while another seven worked without the required documentation.

In the 34-page ruling, the court said that workers were made to stay in the office for 24 hours, including sleeping in the office. Besides, the data mapping electricity consumption showed "seamless day-night production cycles, including during the holidays," Reuters mentioned, citing the judges' statement.

Further, the court document showed that safety devices were removed from the machinery to allow them to operate faster.

This allowed contractors to charge Dior as little as 53 euros to supply a handbag, the document read. The same bag of Dior PO312YKY model retailed in shops at 2,600 euros.

The Dior unit did not adopt "appropriate measures to check the actual working conditions or the technical capabilities of the contracting companies," it added.