The North Korean candy is of such poor quality an excess supply of the confections are being sold in the country's gray markets at marked-down prices, Radio Free Asia reported.
A source in North Hamgyong Province said the gift bag for children is being "trafficked" in the unofficial marketplace, and the authorities are not happy with the situation.
"Trading in 'Day of the Sun' gifts from the state is illegal, and law enforcement had to take action," the source said, according to South Korean news service Newsis.
The quality of the candy is low, and doesn't taste nearly as well as Chinese imports because North Korea's sweets use corn flour, the source said.
The gift bag weighs about 2 pounds and is evenly divided between hard candy and cookies.
Each bag costs about 10,000-12,000 North Korean won, a currency for which there is no official exchange rate.
The quality of candy has dropped significantly since the days of Kim Il Sung, the source added.
"Children don't even give the sweets a second glance because they are of such poor quality," the source said.
The quality problem stems from a long-running issue at state-run factories in North Korea.
Flour and sugar are taken out of the factories to be resold in exchange for much needed currency by the state, according to the source.
Some brokers are buying the unpopular gift bags directly from the factory at 6,000 North Korean won, said a second source in the same province.