Italian Authorities Levy $4 Million Fine Against Giorgio Armani For False Ethical Statements
The privately-held company has vowed to appeal, as it expressed 'disappointment and bitterness' in the ruling and stated, 'Giorgio Armani has always operated with the utmost fairness and transparency toward consumers, the market and stakeholders, as demonstrated by the group's history.'
The AGCM's assessment questioning the integrity of the company and its luxury-leaning Giorgio Armani, Emporio Armani and Armani Exchange brands couldn't come at a worse time. It is celebrating its 50th year in business with numerous high-profile events and product releases. The company generated $2.4 billion last year, according to Forbes.
Held To Account
The AGCM's investigation into company statements in the Armani Code of Ethics and the Armani Values website followed the Armani Group being put under judicial administration by the Milan Court for alleged worker abuse and unsafe working conditions among contractors hired by the the company's GA Operations manufacturing arm.
The court's judicial administration was lifted earlier this year. Nonetheless, the AGCM held the company to account. Its ruling repeated allegations uncovered in previous investigations where safety devices had been removed from machinery to increase production and sanitary and hygiene requirements did not meet legal standards.
The AGCM asserted that GA Operations officials were aware of unsafe working conditions, citing a company document from 2024 that stated, 'In the best of the situations observed, the working environment is at the limit of acceptability; in other cases, there are serious concerns regarding its adequacy and health standards.'
While Armani claims the lifting of the Milan court's judicial administration should provide cover, the AGCM is sanctioning the company for misleading customers about the company's 'strong emphasis on their commitment to sustainability – particularly social responsibility, including worker welfare and safety – which has become a marketing tool used to meet growing consumer expectations.'
'Made In Italy' Under Scrutiny
The AGCM's ruling against Giorgio Armani is the latest blow against the 'Made In Italy' fashion industry. Other prominent brands have come under court scrutiny for allegations of workplace abuse throughout their supply chains, including LVMH's Dior and Loro Piana brands, as well as the privately-held Valentino and leather goods brand Alviero Martini.
In May, the Prefecture offices in Milan introduced a 'memorandum of understanding for the legality of procurement contracts in the fashion production supply chains.' It spelled out the principles of 'legality, fairness and transparency' to protect the prestige of the 'Made in Italy' label. Numerous fashion industry trade associations, trade unions and legal authorities have signed the non-legally binding memorandum.
All of which is well and good, but the 'Made in Italy' label has become tarnished and it's going to take more than company promises, value statements and non-binding legal agreements to restore its place-of-origin integrity, especially as brands and industry stakeholders demand more output from the Italian supply chain.
'Made in Italy has always been considered added value for fashion and luxury brands and a symbol of excellence, thanks to the great expertise of Italian artisans and production techniques that start from tannery and textiles and arrive as finished products,' shared Susanna Nicoletti, industry insider and publisher of the SUN DeLuxe newsletter.
'Made in Italy has always justified high prices because of the industry's specific know how and skills,' she continued.
Profits Before People
Nicoletti believes that over the last 15 years, brands have shifted to putting financial expectations and forecasts first, and let quality standards slide with the industry's workers collateral damage.
'To increase margins, brands and groups simply reduced the quality of products and their cost of production. As brands and groups were forced to pursue infinite growth to match shareholders' expectations, the excellence of Made in Italy declined,' she said and believes that other revered brands are likely to face similar allegations of bad practices in their supply chains as have Armani, Dior, Loro Piana, Valentino and Alviero Martini.
How deep the corruption in the Made in Italy supply chain goes is anyone's guess, but the suspicion is that the practices which have come to light through the current investigations are only the tip of the iceberg.
These allegations are bad enough and more reveals will be devastating not just to the individual brand's reputation but the wider reputation of goods bearing the Made in Italy label.
As Warren Buffett famously said, 'It takes 20 years to build a reputation and five minutes to ruin it.' The clock is ticking on the gold-standard that used to be the Made in Italy label.
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