Caixin
Apr 11, 2016 05:46 PM

Company-Authorized Dealer Is Linked to Latest Milk Powder Scandal

(Beijing) – A company-authorized dealer of baby formula has been linked to a ring making selling knockoff baby milk powder, a case that one analyst says highlights problems with government supervision of the industry.

Police in Shanghai detained the dealer and eight other people from December 9, 2015, to January 7 this year on suspicion they produced and sold knockoff milk powder products, an official with a food-safety office under the cabinet said at a news conference in the capital on April 9.

Acting on a tip-off from Abbott Laboratories Ltd. in September 2015, police found more than 20,000 empty containers of that brand and 65,000 sets of labeling materials, said Ma Chunliang, head of an investigation team from the State Council's food-safety office.

The dealer was also authorized by Beingmate Baby & Child Food Co. Ltd., which is based in the eastern city of Hangzhou, Ma said. He bought a cheaper variety of Beingmate baby formula for 30 yuan per 405 gram container from August 2014 to May 2015, then repackaged it in fake containers of a more expensive Beingmate product.

The knockoff products were sold to retailers in Zhengzhou, in the central province of Henan, and in Hefei, in the eastern province of Anhui, for 140 yuan for a 1,000 gram container.

The ring made 1.6 million yuan by selling 11,000 containers of knockoff Beingmate milk powder. Ma did not say whether the retailers were aware the products were fakes.

Ma also said that the same dealer purchased several brands of baby formula, including New Zealand's Vitacare, for 70 to 80 yuan per container and fake Abbott containers from two manufacturers, Ma said. He then distributed the knockoff goods to retailers in the central provinces of Henan and Hubei and eastern province of Jiangsu for 160 yuan per container.

The retailers who uncovered the knockoffs destroyed thousands of containers and police found others, but some 3,300 packages are unaccounted for, Ma said.

Tests of the products show they met national standards, Ma said, though calcium levels were lower than the manufacturer promised consumers.

Abbott Laboratories Trading (Shanghai) Co. Ltd., Abbott's subsidiary in China, said in a statement on April 9 that it reported the case to police in September 2015 after it found problems with a line of its products.

The company said that police told it to remain silent on the matter while they investigated.

It is well-known that authorized dealers and wholesalers have been involved in repackaging knockoff milk powder, a dairy company employee who asked not to be named said.

Song Liang, an independent industry analyst in Beijing, said that the scandal exposed problems with the oversight of dealers, wholesalers and retailers. He said that a computer system to allow authorities to track baby formula from producers to consumers is still not complete eight years after the dairy industry was hit by a major scandal.

In 2008, dairy products were found to be tainted with a chemical called melamine, a problem authorities said resulted in the deaths of six infants. Some 300,000 babies were made ill.

(Rewritten by Li Rongde)

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