The legislature’s Economics Committee passed a resolution yesterday calling for an investigation into suspected improper business practices at state-owned Taiwan Sugar (Taisugar, 台糖), which provides contract manufacturing services for a private company, RJ International Group (萬豐生技公司).
Taisugar manufactures hyaluronic acid, the major skin hydration component used in RJ International’s Lanami brand cosmetics, which the firm markets at eight to 10 times its purchase price, KMT Legislator Hsiao Ching-tien (蕭景田) said.
Although it costs Taisugar only NT$600 to produce a vial, RJ International sells a box of Lanami containing four hydration vials for NT$8,800 (US$260) to NT$12,800.
Last year, Lanami invested more than NT$30 million (US$890,000) in advertisements to market the product and sold more than 72,700 boxes, Hsiao said.
Taisugar sells a similar product under the brand name Blossom (台糖詩丹雅蘭), which only retails for NT$1,080 for two 10ml vials. Despite using up an advertising budget of NT$35 million, Taisugar quickly ran out of stock after selling only 870 boxes, Hsiao said.
Lawmakers said that Taisugar could have intentionally kept its inventory low to allow its competitor to sell the product at a much higher price.
Lanami’s products have “Manufactured by Taisugar” printed on the label, but the company does not pay Taisugar any royalty or commission, triggering accusations of anti-competitive behavior from several lawmakers yesterday.
“Taisugar has the brand, technology patent, manufacturing and packaging capability and the advertising budget, but it still lost money. This is unbelievable,” Hsiao said.
The resolution urges the Ministry of Economic Affairs to submit the case for an investigation by the Control Yuan.
Responding to lawmakers’ questions, Taisugar chairman Hu Mao-lin (胡懋麟) said that for the first three months of this year, Taisugar grossed NT$17 million from contract manufacturing of skin care products, but only earned NT$6 million from its proprietary brand.
Democratic Progressive Party legislative whip Chang Hwa-kuan (張花冠) said Taisugar was also suspected of manipulating state-owned land by selling and renting them at below-market prices.
Lawmakers have also requested an investigation into possible wrongdoing on Taisugar’s part, Chang said.
The state-run company is engaged in eight lines of business. The company posted losses of NT$62.77 million in 2007 and NT$23.96 million last year. It claimed to have been profitable in the first three months of this year, with earnings of NT$12.2 million.