Reuters reported on the 12th (local time) that a court in Milan, Italy, has designated a special commissioner on the 10th to supervise Dior’s handbag production division, which falls under the umbrella of LVMH (Louis Vuitton Moët Hennessy). This step was taken as a result of an inquiry by the Milan prosecutor’s office into illicit labor practices prevalent in the luxury sector.
The inquiry uncovered that a Chinese company manufacturing handbags for Dior was forcing certain employees to work 15-hour shifts, which was a violation of labor laws. The handbags made during these extended shifts were sold to Dior for 53 euros (equivalent to 80,000 KRW), but were then sold in Dior stores for 2,600 euros (approximately 3.84 million KRW).
After a decade-long investigation, prosecutors have discovered ongoing illegal labor practices in the luxury industry. The latest probe revealed that illegal immigrants were working overnight in workshops near Milan, residing and dining on-site, and even working on holidays. Moreover, it has been confirmed that they were operating machinery without necessary safety precautions.
In April, Giorgio Armani was also subject to similar actions by the court, according to a report by Reuters. A subcontractor of Armani was found to have paid their workers 2-3 euros (equivalent to 3-4 thousand KRW) for 10 hours of work to produce bags. These bags were then sold to Armani’s suppliers for 93 euros (around 140,000 KRW), who then resold them to Armani for 250 euros (approximately 370,000 KRW). The final retail price for these bags was 1,800 euros (about 2.67 million KRW).
After the Dior incident, there has been an increasing demand for thorough investigation of production costs for other luxury brands. LVMH, the parent company of Dior, also holds ownership of several other brands such as Louis Vuitton, Celine, Givenchy, and Fendi. According to Investing.com, LVMH’s total revenue in the previous year was 86.1 billion euros (approximately 128 trillion KRW). Their cost of goods sold was 26.8 billion euros (around 50 trillion KRW), resulting in a gross profit margin of approximately 70%.
Recently, it was disclosed that TAG Heuer, the luxury watch brand owned by LVMH, fell victim to a hacking incident which resulted in the exposure of approximately 2,900 pieces of personal information belonging to their Korean customers. The Personal Information Protection Commission and the luxury industry have confirmed that TAG Heuer was hacked during the process of reconstructing their website between late 2019 and 2020, resulting in the theft of customer data from around the world, including names, genders, and countries of origin. The leaked information also included personal data belonging to approximately 2,900 Korean users.
Despite being threatened by a hacker, TAG Heuer remained unaware of the breach for multiple years until May of last year. After discovering the breach, they promptly reported it to the Personal Information Protection Commission and notified those affected. However, their report was delayed and did not align with the previous requirement of the Personal Information Protection Act, which stated that data handlers must report breaches to the Commission within 24 hours and inform users. This was confirmed during the Commission’s investigation.
A spokesperson from the Personal Information Protection Commission stated that, while customer data was compromised globally, the head office of TAG Heuer in France did not view it as a major issue in other countries and believed appropriate measures had been taken. As a result, no further actions were taken. This decision may be the first of its kind in Korea.
The Commission announced on February 14 that it would levy a fine of 12.6 million KRW on ‘TAG Heuer Branch of LVMH Swiss Manufacturer,’ the parent company of TAG Heuer, for data leakage. An additional fine of 7.8 million KRW was also imposed for failure to comply with safety measures and reporting obligations. However, the specific details of this decision were not disclosed to the public.
A Commission official clarified that the decision to keep the proceedings confidential, including the TAG Heuer case, was made due to the requirement for further review of other agenda items that were discussed at the time.
A TAG Heuer representative in France responded via email to the Commission’s sanctions, affirming that the company is taking the decision seriously and will continue investing in safeguarding customer information against cybercrimes. The company has implemented technical measures to prevent the misuse of any leaked information, and has also notified customers and authorities. It was confirmed that no fraudulent access was made to any customer financial information, including credit card and account numbers.
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