There have been a number of high-profile allegations to disturb the liberal-minded fashionistas.Workers' rights organisations have protested about a series of recent scandals involving Third World textiles firms which affects nearly all major global brands. Cases have been exposed involving fatal factory fires in India, lock-outs of staff in Indonesia, and violence against trade union activists in Thailand and Guatemala. All the major brands insist these cases are isolated incidents, which breach their tough codes of conduct.Yet, despite their attempts to improve conditions, Levi's, Nike and Adidas were recently dragged into the scandal of a Thai supplier called Bed & Bath which closed down its factory last year owing staff $400,000 in back pay. Workers claimed they were forced to work through the night and even drugged to keep them awake.Meanwhile, Gap is among 26 US clothing and sports firms, including Calvin Klein and Tommy Hilfiger, who have agreed to create a $20m compensation fund to settle a lawsuit by sweatshop workers for 23 local garment companies on Saipan, an island near Guam in the Pacific.Activists in Europe's main anti-sweatshop group, the Clean Clothes Campaign, also argue that even the minimum pay rates the major companies demand of their suppliers are inadequate. One T-shirt factory in Madagascar that supplies Gap pays a basic wage of £22 a month.American Apparel's co-founder, Dov Charney, predicts the company will open a factory and design department in London. He wants American Apparel, which has grown from having 50 workers in 1997 into the US's largest domestic garment maker, employing 1,200 workers, to become a world-famous brand."The message is be a benchmark company, and that means efficiency.

It means an exhilarated workforce committed to quality," he said.Mr Charney claims his firm's success is down to his own brand of "caring capitalism". His staff earn an average of $12 an hour, nearly double California's $6.75-an-hour minimum wage, have medical and life insurance, are given medical and dental care, and are guaranteed job security if they need time off.His sales - the ultimate test of business success - are rising fast, nearly doubling in the past year to an expected $78m. He also claims to have a waiting list of job applicants and allows trade unions to inspect the factory floor.However, Rob Harrison, editor of Ethical Consumer, a Manchester-based monthly "shopping and politics" magazine, said the marketing strategy could backfire. Many "fair trade" companies, such as the coffee firm Caf?rect, had learnt that quality was a better selling point than ethics.

"The more ambitious ethical companies are moving ethical claims to the back of their marketing mix," he said.Mr Charney, 34, said he agreed with Mr Harrison, and insists his central strategy is to build his reputation on high-quality garments made by a proud workforce.But American Apparel's brash claims are already raising a few eyebrows among ethical trading campaigners in the UK.Chantal Finney, co-ordinator of the Norwich-based textile workers' rights campaign Labour Behind the Label, was impressed by its policies but sceptical about the hype. Since Mr Charney's staff do not yet get paid holidays or guaranteed sick pay, $12 an hour was not as good as it appeared, she said.A British factory would have much tougher employment laws to deal with, Ms Finney said, and could find it far harder to compete against cut-price labour from Asian or African factories paying $2 a day. "Let us say then that American Apparel is better than average but that it has some way to go still before it deserves to be called ethical," she said.Yet the anti-sweatshop charities believe American Apparel could prove to the likes of brands such as Gap, Nike, Levi's and Adidas that better wages and conditions do pay. "Consumers really want to buy something ethical, so they've a role to play in showing the regular industry that it's possible to source ethically and make a profit," said Ineke Zeldenrust of the Clean Clothes Campaign in the Netherlands.Additional reporting by Steve Bloomfield and Nadia IqbalThe big labels and their accusersADIDASSamoa trainers £34.99Accusation: Some workers get $2 a day. In Indonesia, unions are banned and holidays refused.Response: It has 30 staff checking factory conditions and pay and a 60-hour-a-week limit. It sacked nine Chinese contractors last year for poor practice.LEVI STRAUSS501 jeans £55Accusation: Used a Thai sweatshop that shut down, leaving 350 workers unpaid.Response: This was an isolated case.