MILAN — The Italian fashion industry was abuzz Monday following the airing the night before of a major investigation into industry practices on the TV program “Report.”

This story first appeared in the December 4, 2007 issue of WWD. Subscribe Today.

The documentary on the national TV channel RAI 3 alleged that luxury companies use underpaid and often illegal Chinese immigrants to craft high-priced bags; top editors consult with brands on their ads and shows, and that Vogue editor in chief Anna Wintour successfully pressured the industry to truncate Milan Fashion Week.

More than 4 million viewers, a record for the program, tuned in to watch “Schiavi del Lusso,” or “Luxury Slaves,” presented by Milena Gabanelli, who founded “Report” in 1997, and conducted by journalist Sabrina Giannini.

Prada, Fendi, Gucci, Dolce & Gabbana and Ferragamo were among the fashion houses mentioned in the program. Save for Prada, all the others declined to comment Monday.

One of the main concerns for the companies mentioned appears to be the fact that “Report” highlighted how a bag may end up in the stores priced at 15 times its production cost. In many cases, the luxury goods houses delegate the manufacturing process to subcontractors, which is when problems can arise.

“We don’t pocket such high margins as those reported by the show because we have many costs in design, samples, quality control, packaging and we buy and provide the raw materials,” said Tomaso Galli, group communication and external relations director at Prada. “All these and many other costs were not taken into consideration by the show.”

Galli specified that Prada has 14 manufacturing plants, all in Italy, where the core of its production is concentrated, and a large network of outside suppliers, some of which are small or medium-sized laboratories that supply a portion of the merchandise. “We ask all of them to sign ethical conduct codes, independently from their size,” said Galli.

“Report” showed the Chinese owner of a facility in Italy who contended that, in order to produce at the price Prada was asking, he could not legally employ the workers and regularly pay taxes.

Prada waved off the accusation, calling it an excuse to elude the ethical code. “When we discover [the noncompliance of the ethical code], we terminate the contract with that supplier immediately, which is what happened in this specific case,” said Galli, adding that ties with this lab were severed a month before the investigation on “Report.” “Prada obviously wants to find the best-quality suppliers at the best price, but we pay market prices.”

Sometimes incognito, Giannini and her TV crew zigzagged their way through a maze of production plants run by Chinese immigrants that have sprouted up in Tuscany’s Prato area, near Florence. Often illegally hired, the show contended the workers are underpaid to work 10- to 12-hour shifts and actually sleep and eat in the factories, often behind fake partitions — well disguised even from the police.

“We have two different kinds of inspectors, those who check quality and those who control the working conditions of the suppliers. But we’re not the police and our inspectors do not have an unlimited access to all areas and documents,” said Galli. “Regrettably, situations like the one described in the show, which we agree are unacceptable, may occasionally occur notwithstanding our controls, but they are odd and the show did not bother to mention what the overwhelming reality is.”

Late Monday night, the Web site of “Report” was inundated by streams of frustrated and angry bloggers, consumers and photographers, some of whom swore they would never buy another designer item.

Some industry executives also praised the investigation.

Mario Boselli, head of the Italian Chamber of Fashion, said he was interviewed this summer and that he was informed about the content. “They stayed for more than an hour and they were more than correct with me,” he said.

He added the Camera della Moda “is very pleased, everything was well documented and the show paid double attention on both the “Made in” labeling, demanding a clear and precise regulation, and the issue of the show calendars, underscoring the strong pressure coming from the American press. The four-day week does not stem from our incapacity, but from outside conditioning.”

Boselli described “Report” as “very courageous,” and while describing it as aggressive journalism, he praised the show as one that denounces wrongdoings. “We don’t need yet another show saying that everything is just fine.”

While he said it “did not help the designers mentioned, it helped the Camera. I can’t complain about anything.”

Tod’s Group chairman Diego Della Valle was unavailable for comment as he was flying to India, where the brand will open its first flagship in New Delhi in March. He did speak to Giannini, though, on the Made in Italy issue.

When she asked him why a Chinese billionaire would buy a Made in Italy bag knowing it’s made in China, he agreed. “I’m a big supporter of the Made in Italy label production and I want to tell other important brands like ours that we must avoid undermining the great consideration that the world has of our products,” he told the program. “People with money want to buy Italian products and this helps preserve the great Italian artisanal skills. I’ve been saying this for 10 to 15 years, but sometimes I think it’s too late. We must act fast.”

Some interviewees spoke on the record, others clearly refused to comment or participate and still others initially agreed to talk, such as photographer Paolo Roversi, but later backed out.

Brunello Cucinelli, who was part of the show and lauded for his company’s ethical work codes, said he found it inappropriate that “many of the people mentioned did not make themselves available or, worse, gave the interview and then demanded that it should not be shown.”

He added the journalist did in-depth interviews both in Milan and Solomeo, at the company’s headquarters. “The show was not entirely negative, underscoring the importance of the fashion business,” he said. “We must be brave and expose the facts. I was not aware of this hidden reality and was taken back by the show, although, knowing ‘Report,’ I was not surprised they named names.”

Noted Prada’s Galli: “We sent a letter to [‘Report’] asking for questions, but we never received one. I don’t see why [Prada chief executive officer] Mr. [Patrizio] Bertelli should have agreed to an interview with such an approach. All partial information is negative and misleading.”

On the media front, “Report” targeted Wintour’s Italian counterpart, Franca Sozzani, alleging she shunned Italian studios, photographers and stylists for foreign ones. Sozzani did not return phone calls Monday seeking comment on the program.

Another sticky point was the delicate balance between advertisers and editorial coverage, with a crop of journalists and high-profile publishers denying any pressure. It also showcased an Italian TV journalist who walks away with a pair of Cesare Paciotti shoes in return for having dedicated reel space to his new collection.