Chinese subcontracted handbag priced at 130,000 won sold by Armani for 2,630,000 won

Italian luxury brand Giorgio Armani has been embroiled in a controversy over the exploitation of Chinese workers. A Chinese subcontractor, who was subcontracted again by another subcontractor, supplied handbags for 93 euros (about 130,000 KRW). Giorgio Armani Operation SPA sold these handbags for 1,800 euros (about 2.63 million KRW).

The ANSA news agency reported on the 5th (local time) that the preventive measures division of the Milan court designated "Giorgio Armani Operation SPA" for judicial administration for one year. This company is a subsidiary of the Giorgio Armani fashion group, responsible for the design and production of clothing and accessories.

The appearance of a Chinese factory released by the Italian police
[Photo by AP/Yonhap News]

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The police found that the subsidiary hired a subcontractor, who in turn subcontracted to a Chinese company near Milan. Ultimately, illegal Chinese workers employed at a factory run by Chinese owners produced luxury bags bearing the Giorgio Armani brand.

These Chinese workers reportedly worked more than 14 hours a day without holidays and received low wages of 2 to 3 euros per hour (about 2,900 to 4,400 KRW). Videos released by the police showed unsanitary and poor working conditions, including dirty bathrooms, broken sinks, and windows covered with cardboard.

Dormitory of a Chinese-operated factory released by Italian police [Photo by AP/Yonhap News]

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Regarding the handbags sold by Giorgio Armani Operation SPA for about 1,800 euros (about 2.63 million KRW), the authorized subcontractor who acted as an intermediary received 250 euros (about 360,000 KRW) from the original contractor. This subcontractor paid 93 euros (about 130,000 KRW) to the Chinese subcontractor who actually produced the handbags. The middle subcontractor thus earned about 157 euros (about 230,000 KRW) per handbag.

The police stated, "Giorgio Armani Operation SPA was able to maximize profits and reduce labor costs through this system (where the Chinese factory actually produces the products)."

Giorgio Armani logo
Photo by Reuters/Yonhap News

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The Armani Group explained that they were unaware of the multi-level subcontracting issue. The Armani Group stated, "We have always taken control and preventive measures regarding the supply chain structure," and "We will cooperate fully with the authorities."

The Chinese factories were eventually ordered to shut down. Four Chinese factory owners reportedly received fines and administrative sanctions totaling 146,000 euros (about 210 million KRW).

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