Quick Take

A Troubling Pattern in Luxury: What the Loro Piana Case Reveals

Dorothée Baumann-Pauly, Victoria Anderson, & Lucy Siers

August 4, 2025

In mid-July, LVMH-owned cashmere brand Loro Piana became the fifth luxury brand that was put under judicial administration in Italy because of worker abuses in its supply chain. As a result Loro Piana will be subject to court monitoring for a year.

This case, along with the four prior investigations focused on Dior (LVMH), Valentino (Kering), Armani and Alviero Martini, has tainted the value of the ‘Made in Italy’ label. It is supposed to be a source of pride for luxury brands and their consumers, but now that reputational advantage is under a cloud.

The five cases were brought by Italian prosecutors who began investigating networks of high-luxury production sites in 2023. While each of these cases focused on the labor practices of individual luxury brands, collectively they suggest a very troubling pattern.

Three things are remarkable about these cases:

Italian prosecutors, rather than activist organizations, are sounding the alarm and driving these cases forward.

At the center of each of these investigations are allegations that workers for these brands are working in subcontracting facilities in Italy where, according to court documents, “hygiene and health conditions are below the minimum required by an ethical approach.” The growing attention from Italian authorities signals that conditions in these subcontracting factories are so poor that public authorities need to investigate and act. The Italian prosecutors’ model is what other governments need to do as well, for example, in the UK, where issues related to poor working conditions have also been in the news in recent years. What this signals is that brands need to prepare for greater scrutiny of their supply chain practices.

The cases make it clear that subcontracting is not an outlier in the global apparel industry but rather, the norm.

When we began providing systematic evidence for subcontracting in the context of Bangladesh’s Ready-Made Garment sector following the Rana Plaza tragedy in 2013, many stakeholders pushed back. They tried to minimize the scale and scope of this business practice. It was an inconvenient truth that brands were unwilling to face after Rana Plaza.

Now, prosecutors in Milan are describing what researchers and labor advocates have identified in other supply chains. They describe subcontracting as a “feature, not a bug in the system” and that “luxury brands routinely turn a blind eye to issues that should raise red flags in order to maximise profits.”

Subcontracting the production of Loro Piana’s cashmere products to informal and unregulated workshops on the outskirts of Milan has led to the employment of undocumented migrant workers who are being forced to work up to 90 hours a week for just 4 euros ($4.85) per hour. This case highlights how even luxury fashion brands depend on the same cost-cutting and opaque subcontracting practices as fast fashion, effectively enabling the exploitation of undocumented workers in the pursuit of profit.

Effectively addressing subcontracting requires tackling its root causes with more nuanced and targeted solutions.

According to public reporting, the Italian luxury brands immediately terminated the relationships with the suppliers that engaged in unauthorized subcontracting, but there is no mention of what happened to the workers who lost their jobs and often are then stranded without livelihood in Italy.

Preventing these cases in the future requires a different approach. According to our research, the key drivers of subcontracting are brands’ purchasing practices. In a highly competitive, trend- and season-driven industry, subcontracting can be a rational business choice due to lower prices and lead times. In the past, there was little risk of detection in part because public authorities paid little attention, and brands turned a blind eye because the practice allowed them to cut costs. While these pressures are stronger for mainstream fashion brands, they also seem to affect the luxury sector. Although the luxury apparel sector enjoys higher margins, price pressures still exist.

As public pressure increases, luxury brands must move beyond reactive damage control and take proactive steps to properly address these issues in order to address and correct exploitation. They need to invest in hiring and training procurement teams who will properly vet and oversee their suppliers. Governments also need to create regulatory systems that hold brands as well as their local contractors financially accountable for the exploitation of these workers. As The Business of Fashion wrote, the ‘Made in Italy’ brand has long had a “carefully constructed marketing image, deeply linked to artful claims of exclusivity, craftsmanship, and impeccable standards.” If these investigations keep cropping up, the image and trust of their consumers could quickly unravel.