For years, whispers about luxury fashion’s inflated pricing have circulated among industry insiders. Now, those whispers have been backed by court documents, prosecutors, and a formal investigation in Italy—pulling back the curtain on how some of the world’s most powerful fashion houses actually operate.
A recent Italian investigation, reported by Reuters, revealed that iconic luxury brands including Dior and Giorgio Armani paid subcontractors only a fraction of their handbags’ retail prices—while the bags themselves sold for thousands of dollars.
According to court documents cited by Reuters, Milan prosecutors found that Dior, owned by LVMH, paid as little as $57 per handbag to subcontractors for products that retailed for approximately $2,780. Similarly, Armani subcontractors were reportedly paid $99 per bag for handbags that sold for more than $1,900. Notably, these figures excluded material costs such as leather—meaning labor compensation was even more starkly disconnected from retail pricing.
The investigation went further, uncovering troubling labor practices within parts of the luxury supply chain. Authorities found that some workers—many of them from China—were allegedly living and sleeping inside factory facilities to keep production running 24 hours a day. Electricity usage data suggested work continued overnight, on weekends, and during holidays. Investigators also reported that safety devices were removed from machinery to speed up production, and that several workers lacked proper legal documentation or work permits.
Perhaps most damaging was the finding that Dior “did not adopt adequate measures” to properly verify the conditions or capabilities of its subcontractors. Prosecutors described these labor violations as systemic within the luxury sector, driven by relentless pressure to maintain high profit margins.
As a result, judges in Milan placed units of both Dior and Armani under judicial administration for one year, though the brands are allowed to continue operating during that period. Dior has since submitted a memo citing recent supply-chain improvements, while the Armani Group stated it is cooperating with authorities and already has measures in place to prevent abuses.
Officials emphasized that the issue extends beyond worker mistreatment. Milan Court President Fabio Roia noted that such practices also create unfair competition, disadvantaging ethical manufacturers who follow labor laws but cannot match artificially low production costs.
Despite LVMH reporting more than 2,000 suppliers and 1,700 audits conducted last year, the investigation raises uncomfortable questions about oversight at the highest levels. LVMH chairman Bernard Arnault remains one of the wealthiest individuals in the world, while his daughter Delphine Arnault serves as CEO of Dior.
The takeaway is stark: luxury pricing is far less about craftsmanship than consumers are led to believe. What’s being sold is status, mythology, and exclusivity—often built on supply chains that remain largely invisible to the public.
As transparency becomes unavoidable, the fashion world faces a reckoning. Consumers are no longer asking only what does it cost? They are asking who paid the real price?
And once you understand that difference, the designer label never looks quite the same again.
