The women in the 2004 version of The Merchant of Venice had their breasts exposed because they were portraying prostitutes. A series of laws were passed in the 1400s that allowed prostitutes to bare their breasts so that they could ply their trade and stimulate the tourism sector of the Venetian economy. These laws also served to hinder male prostitutes who would try to cross-dress and avoid the penalties for homosexuality. By the late 1400s, it was required by law for prostitutes to bare their breasts on the Ponte delle Tette (Bridge of Breasts) if they wished to seek customers. (Smith, p. 31).

These practices carried through the 16th century and influenced Venetian fashions which led some noblewomen to adopt clothing that left them bare-breasted (USC Dornsife, 2013). With Merchant of Venice being written in the late 1590s, my understanding is that the intent of the director was to try for historical accuracy.

So, among prostitutes/courtesans in 15th and 16th century Venice - it would have been a common practice that was legally enforced depending on where they were trying to do their business.

Smith, M. Encyclopedia of the Breast. Rowman & Littlefield. 2014.

Morris, D. The Naked Woman: A Study of the Female Body. Macmillan. 2007.

Fashions of the Venetian Courtesans. Veronica Franco Project. USC Dornsife. 2013. URL: http://dornsife.usc.edu/veronica-franco/fashion-of-the-venetian-courtesans/