This judicial intervention is part of a broader crackdown on labor violations within the luxury fashion sector, with similar cases against brands like Giorgio Armani, Dior, and Valentino.

The luxury market's slow growth projections through 2027, coupled with economic pressures in Europe and China, further complicate LVMH's recovery efforts.

The court's ruling follows investigations revealing that many workers, some undocumented, endured poor conditions, excessive hours, and wages as low as 4 euros per hour, with some sleeping on production floors.

Loro Piana, an Italian luxury brand owned by LVMH, has been placed under judicial administration by the Milan court for one year due to its failure to prevent the exploitation of migrant workers by its subcontractors.

Loro Piana was informed of these issues in May 2025 and responded by terminating its relationship with the problematic supplier within 24 hours, emphasizing its commitment to human rights and compliance.

Despite the oversight, Loro Piana is not facing criminal charges, but the court imposed fines exceeding 181,000 euros and suspended activities at two Chinese workshops for safety violations.

The court's decision aims to prevent the company from engaging in criminal activities, with a special administrator appointed to oversee improvements in its supply chain and labor practices.

This case highlights systemic issues in the luxury industry, as five other LVMH brands have faced similar labor violations since 2023, raising concerns about widespread exploitation.

Ultimately, the outcome of LVMH's response to these issues will determine whether it can maintain its market position or suffer lasting damage to its reputation.

The scandal threatens LVMH's brand reputation, especially as consumer preferences shift toward transparency and ethical sourcing, with competitors like Hermès gaining an advantage.

While LVMH reported strong financials, including a net income of €12.6 billion in 2024 and €20.3 billion in Q1 2025, investor sentiment remains cautious amid ongoing legal and reputational challenges.

This incident underscores the stark contrast between the high prices of luxury goods, such as cashmere jackets costing €3,000, and the poor conditions of the workers who produce them.