Armani and Dior probed in Italy following worker exploitation claims

London/Rome (CNN) — Italy’s competition authority is investigating whether Armani and Dior have misled consumers about their production processes, following reports that local companies in their supply chains pay workers too little and force them to work long hours.

In a statement Wednesday, the authority said Armani and Dior “may have issued untrue statements about their ethics and social responsibility, in particular with regard to working conditions and compliance with the law by their suppliers.”

The investigation is focused on some firms within the Armani Group and some within the LVMH-owned Dior Group, the authority said, adding that inspections had been carried out at these firms’ premises Tuesday.

The firms are being investigated for possible “unlawful” conduct in the marketing and sale of clothes and accessories, in violation of Italy’s Consumer Code, it noted. Breaches of the code can result in fines of up to €10 million ($10.9 million).

Many mainstream fashion brands have long faced allegations of exploitative working conditions in their supply chains. But increased scrutiny of luxury brands stands out because it challenges perceptions that high prices, Europe-based suppliers and superior artisanship mean garments are produced ethically.

Italy’s competition authority said Armani and Dior “emphasized craftmanship and quality,” while using supplies from factories “employing workers who would receive inadequate wages.” In some cases, workers are also forced to work long hours under “inadequate health and safety conditions.”

These practices contrast with “boasted levels of production excellence” by the two groups, it noted.

The probe comes after Milan prosecutors accused several Chinese-owned firms in Italy, producing luxury goods for Dior and Armani, of systematically abusing their employees, Reuters reported.

In a statement shared with CNN, Dior said Italian authorities had recently informed the company of “illegal practices” at two of its suppliers involved in the production of leather goods for men.

“The house of Dior firmly condemns these unworthy acts, which contradict its values and the code of conduct signed by these suppliers… Despite regular audits, these two suppliers had evidently succeeded in hiding these practices,” the company added, noting that it would not place any new orders with the firms in question and was collaborating with Italian authorities.

Armani has denied the allegations levied by the competition authority, but said it would cooperate with the latest investigation. “The companies involved are fully committed to (cooperating) with the authorities (but) believe that the allegations have no merit and are confident of a positive result following the investigation,” the group told CNN in a statement.

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