I would be appalled by this if it didn't smell of an epic marketing gimmick. I don't agree with their tactics at all, but if you look at it from a strictly business (read: not ethical) sense, it does get the job done.
Anytime there is a heinous breech of moral or social code, the media latches on to it and blows it up. Are clothes like this going to get attention for quality celebrities wearing them, unique designs/craftsmanship, or exclusivity? No. So how do they get the exposure and traffic they need? Create a controversy.
Would I have ever looked at Gasp Jeans website had I not seen this article? No way. Everyone is looking, even if they are appalled. That is what the company is banking on.
There has been a lot of research on how many no's it takes to get a yes and the consensus is 8 no's for 1 yes. Business-wise, Gasp Jeans would rather have 800,000 website hits as opposed to 8,000 as that translates to 100,000 sales as opposed to 1,000. Even if the controversy skews the number of no's per yes a bit, there is no denying they are getting more traffic which translates to sales. (I just made up the website traffic numbers for sake of argument, but you get the idea.)
Just look at their website. http://www.gaspjeans.com.au/
Apparently being a jerkbag company doesn't keep people from buying. They just wanted to attract attention, get people looking, and hope a) people would fall for the clothes and order them regardless of the controversy and/or b) people would buy into the mystique and want to have something by the infamous Gasp Jeans.
Finally, I doubt that the original shopper and letter was a genuine situation. I almost suspect that was planted as part of the marketing. There is just something super fishy about this whole thing. I definitely thing Gasp Jeans is playing media hype and riding the outrage wave.