They already sell everything from snowboards to diapers. But even for Italy's omnipresent Benetton clan, its latest acquisition was a break from business as usual.

Together with Pirelli, another venerable Italian family run venture, Benetton last week took control of Telecom Italia and mobile phone unit TIM from Mr Roberto Colaninno, the ousted Telecom Italia chairman.

Their 7 billion (£5.5 billion) deal gained praise from the Italian government for saving the telecoms company from a foreign takeover but is certain to raise concerns at the European Commission. Those concerns will likely be one of the first issues Mr Gilberto Benetton, the deputy chairman of Benetton Group, will have to face as vice-chairman of Telecom Italia. (Mr Marco Tronchetti Provera, Pirelli chairman, will become Telecom Italia's chairman, while Mr Enrico Bondi, former head of Montedison and Mr Carlo Buora of Pirelli will take the roles of co-chief executives.)

The venture represents a dramatic leap in ambition for Benetton and comes at a critical time for the family, which has seen its company's stock price steadily decrease in the past year. Shares of Benetton Group, 70 per cent of which is owned by the family, have dropped to around $27 a share from a 52-week high of $43. Benetton has been squeezed by competitors such as Gap, which has had a tough year but was still able to outperform its rival in the same 52-week period.

Things were not always that way. For much of Benetton's 30-year existence, especially during the early, pioneering years, the ruling family enjoyed many more successes than failures.

It all started when Ms Guiliana Benetton, now Benetton's creative director, wowed her family and friends in Trevisio, Italy, with her yellow knit pullover, or so the legend goes. In the 1950s, while Italy was painfully recovering from the second World War, Benetton siblings Luciano, Gilberto, Carlo and Giuliana were having a difficult time making ends meet following the death of their father.

In 1955 the siblings sold some of their toys and bought a knitting machine for Guiliana. Luciano, who had already left school to support his sister, brothers and mother, began to hawk Guiliana's garments to local shops.

The idea turned out to be a profitable one and, in 1965, they founded Benetton, taking control of different sections throughout the years and adding new generations of Benettons to the payroll.

Guiliana's knitting machine turned into a factory in Trevisio, the family's hometown, and the company's first shop opened in 1968. In the 1970s Benetton expanded to 200 stores in Italy and moved its headquarters into a 17th-century villa.

By the 1980s, Benetton had broken into the US market and the family began to diversify and expand into other businesses, such as ski-equipment with the purchase of Nordica.

Serious trouble for Benetton began in the late 1980s, when franchisers began to suffer from the company's relentless expansion and competitors began to eat into Benetton's profits.

The 1980s also saw the dawn of Benetton's controversial advertising campaign, which included images of a nun kissing a priest, a man dying of AIDS and the trademark Benetton multiracial closeups of children.

Perhaps one of Luciano Benetton's most daring stunts was an advertisement that featured the president of the group naked and asking for his clothes back. The campaign was especially brazen as it ran during Mr Benetton's stint as an Italian senator, which lasted from 1992-94.

But the company went too far - in many peoples' views and in a business sense - when it showed death-row convicts in a flattering light to make a point against the death penalty. The outcry was so furious that in 2000 Sears, Roebuck dropped Benetton, just two years after the department store chain had agreed to sell Benetton.

After 18 years Luciano Benetton made the painful decision to drop his creative director Mr Oliviero Toscani and opt for a safer, less political, alternative.

Another big change came about the same time, when the family decided to shift from small franchised shops to the megastore format.

So far the changes have done little to resuscitate Benetton's stock. Whether this week's telecoms purchase will make a difference is uncertain, although one can bet that those most interested to see improvement are the Benetton family, who have watched their fortunes drop nearly 40 per cent in the past year.