Commitments in the fashion industry: the Italian Dior Case

The Italian Competition Authority (ICA) has accepted commitments from companies in the Dior Group in relation to certain alleged unfair commercial practices relating to the promotion and sale of clothes and accessories.

What you need to know

• Dior's commitments largely reflect the requirements of the Corporate Sustainability Due Diligence Directive (Directive 2024/1760) (CSDDD) which EU Member States are required to have implemented into national law by July 2026, with the requirements coming into force by July 2027.
• The ICA's investigation into Dior focused on ethical and social responsibility statements featured on Dior's website and in its corporate codes, which were considered to be potentially misleading. 
• This case reflects the ICA's growing focus on sustainability claims (including ethical and social responsibility statements) used as part of a brand's public image and marketing campaign. 
• Under the CSDDD, all companies will be expected to ensure that their sustainability and ethical statements are substantiated by concrete practices and supported by robust monitoring and transparency mechanisms. Companies should not wait for the CSDDD to enter into force to start reviewing their statements and internal policies. 

At a time when the European Commission (with its proposed Omnibus Package) is considering weakening the proposed sustainability reporting and due diligence requirements, the Dior case is an important reminder for companies that consumer protection authorities may impose measures to safeguard consumers by relying on the concept of misleading practices instead of waiting for specific statutory requirements relating to corporate sustainability due diligence. 

The ICA's investigation focused on concerns that Dior was sourcing its products from workshops in Italy where workers were subjected to excessive working hours, poor hygiene and safety conditions and were paid inadequate wages in contrast to the standard of production excellence claimed by Dior on its website. 

The ICA closed its proceedings after accepting extensive commitments from Dior, including commitments relating to:

• Enhanced information on the sustainability of Dior's supply chain;

• Improved selection and monitoring of suppliers;

• Funding activities promoting ethical standards in the "made in Italy" supply chain;

• Creation of a new internal compliance function; and

• Specific compliance training for staff and external suppliers on ethical standards in the supply chain. 

Enhanced information on the sustainability of Dior's supply chain

Dior has committed to revise its sustainability webpage to clarify its ethical and social responsibility statements, including information on production structure, supplier standards, and supply chain controls. This is intended to ensure that third-party workshops comply with Dior's ethical and legal standards. On its website, Dior will provide information on its supply chain and production facilities, as well as how it manages production, specifying that it uses third-party workshops for production and outlining the criteria used for their selection, evaluation and monitoring. 

Third-party workshops will be subject to regular audits. Dior has also committed to include in its ethical claims that it regularly selects and monitors its workshops and suppliers to minimise the risk of legal and ethical violations. In addition, Dior has committed to state that it will act promptly in cases of non-compliance to demand immediate compliance by the workshop or supplier. In the event of a more serious breach, Dior will terminate its contract with the workshop or supplier.

Finally, Dior has committed to report the number of audits performed each year from 2025 onwards, specify the types of audits performed and provide aggregated results. 

These commitments are broadly aligned with the requirements of Articles 10, 11 and 16 of the CSDDD which relate to the prevention of potential adverse impacts, bringing any adverse impacts to an end and public reporting requirements. 

Following the launch of a criminal investigation in parallel to the ICA's proceedings, Dior has also strengthened its supplier selection and audit process. In particular, Dior has introduced new types of audits, set up a dedicated department and developed a digital platform to monitor compliance. Dior offered the ICA commitments to ensure the ICA has oversight of this process to better safeguard consumers. The specifics of these measures have been kept confidential by the ICA. 

In addition, Dior will comply with monitoring requirements (on its own business and its business partners) based on quantitative and qualitative measures (again broadly in line with the requirements set out in Article 15 of the CSDDD). 

Dior will fund independent projects aimed at identifying and supporting workers (with a regular working permit in Italy) who are exposed to exploitative labour conditions in Italy, regardless of the brand involved. Dior has committed EUR 2 million over five years to support training, protection and inclusion programmes and to make regular reports to the ICA on outcomes and beneficiaries. This commitment highlights the increasing importance of direct or indirect forms of redress, including the allocation of financial measures, when designing commitments packages.

This commitment goes beyond the requirements of Article 10 of the CSDDD (which identifies targeted financial support to SMEs within the brand's supply chain as a potentially appropriate measure to prevent adverse impacts) as Dior's funding will provide support to workers who are not involved in the Dior supply chain.