UK activists have charged that fashion giant Primark is employing illegal immigrants at half the legal minimum wages to make knitwear for the chain.
The workers allegedly received Ģ3 an hour, nearly Ģ3 less than the minimum wage of Ģ5.73, for 12-hour days, seven days a week.
The Primark management itself has launched an inquiry after an investigation found that Manchester-based garment firm TNS Knitwear, which supplies 20,000 garments to the company each week, may have contravened employment and immigration laws.
Breaches of the legislation could lead to fines of as much as Ģ10,000 for each illegal worker and potential prosecution for employment law abuses and tax evasion.
TNS supplier Fashion Waves was also investigated as part of the Observer and the BBC's five-month probe into Manchester's textile industry.
A hidden camera filmed employees at both TNS and Fashion Waves admitting their illegal status in the UK.
One Pakistani working on an order for Primark reportedly said that his visa ran out eight years ago.
The investigation exposed working conditions inside TNS and Fashion Waves as cramped and cold, apparently breaching health and safety regulations.
The undercover journalist also reportedly received cash-in-hand payments of about Ģ3.50, apparently bypassing the taxman.
Many of the garments made by the Pakistanis, Afghans and Indians ended up two miles away in large branch of Primark in Manchester's Market Street.
TNS Knitwear, which supplies some of Britain's most famous brands, denied the allegations.
There was no comment from Fashion Waves.
Solicitors for Zahid Sarwar, director of TNS, said the company had been audited by Primark in the last six months.
Primark told the Observer: 'Primark is conducting its own investigation. Once that investigation is completed, it will decide how to proceed. Meanwhile, Primark has handed all relevant information passed to the company over to the relevant enforcement agencies so they may take action.
'We are extremely concerned about the very serious allegations made against our supplier TNS Knitwear and against TNS's unauthorised subcontractor, Fashion Waves.'
The Ethical Trade initiative, which monitors Britain's top retailers, said it is investigating the allegations.
ETI said: 'We are horrified at the allegations of abuses exposed by this investigation and we are particularly concerned that they involve an ETI member. First, we have met with Primark and demanded that it provides us with a prompt, full and frank response to the allegations. Where they are substantiated, the company has a clear obligation to work with the suppliers concerned to put things right.
'Second, we have immediately launched a formal inquiry to establish whether or not there is a systematic failure on Primark's part to implement the ETI base code. If such a failure were established, this would be grounds for formal sanctions.'
Primark has agreed to remove all references to ETI from its 140 store fronts in Britain, but said it was 'disappointed' that the ETI was prejudging the situation before the allegations had been investigated.