Italian labels Patrizia Pepe and Dixie under court supervision over labour exploitation

ROME, Nov 6 (Reuters) - Italian fashion labels Patrizia Pepe and Dixie have been placed under court administration over the alleged exploitation of foreign workers in their supply chain in Tuscany, prosecutors and judicial sources said on Friday.

The measure targeted two companies that relied on unscrupulous subcontractors to lower production costs, Luca Tescaroli, chief prosecutor in the city of Prato, said in a statement, without naming them.

Judicial sources later confirmed the companies' identities.

A spokesperson for Patrizia Pepe had no immediate comment, while a spokesperson for Dixie did not immediately respond to a request from Reuters.

Milan courts have taken similar moves in recent years against other well-known labels, including LVMH-owned LVMH.PA cashmere firm Loro Piana and units of fashion houses Valentino and Giorgio Armani, putting pressure on the entire Italian fashion industry to improve labour standards.

'CULPABLE INACTION AND NO PROPER OVERSIGHT'

Being placed under administration means that court-appointed external administrators will verify steps due to be taken by Patrizia Pepe and Dixie to meet judges' demands on the cleanup of their supply chains.

The two companies, however, are not under any criminal investigation.

The Florence court that placed them under supervision reprimanded them for "culpable inaction and failure to exercise proper oversight" on subcontractors who exploited Bangladeshi and Albanian workers, Tescaroli said.

The workers were poorly paid, forced to work long hours, denied holidays and constantly harassed and abused, Tescaroli said, adding that 18 of them who cooperated with investigators would be offered legal residence permits.

The prosecutor also said it was the first labour abuse case in the textile city of Prato involving Albanian subcontractors, saying they had adopted criminal practices traditionally associated with Chinese-owned sweatshops.