State hotline floated to report bottle deposit fraud by sellers

The Detroit News

Lansing –  Some state lawmakers and environmental advocates want to create a hotline to stop retailers from fraudulently cashing in on Michigan’s bottle deposit law.

Bottle bill fraud takes deposit money away from state pollution prevention and cleanup programs. 

The effort isn’t to stop the kind of scam immortalized in a 1996 “Seinfeld” episode where Kramer and Newman trucked empty cans and bottles from New York to Michigan for the higher deposit redemption. 

New technology that scans barcodes makes it much harder to redeem cans from out of state, according to Conan Smith, the president and CEO of the Michigan Environmental Council.

Instead, the recently introduced Senate bill would focus on reporting large violations, mostly by retailers who buy beverages out of state and sell to Michigan residents Smith said. 

“This is actually oriented at two major systemic problems we’ve been experiencing with the bottle bill,” Smith said. 

First, the state has a problem of retailers buying bottles and cans in Ohio, where there is no bottle deposit. Then they sell the beverages in Michigan, often to gas stations, where the consumer still pays the cost of the beverages plus the deposit. 

“You as a consumer are charged the 10 cent bottle deposit, but you’re not able to return that can because it’s not a Michigan can,” Smith said. “You get screwed out of 10 cents, and these fraudulent sellers pocket your dime.”

Michigan has a problem of retailers buying bottles and cans in Ohio, where there is no bottle deposit. Then they sell the beverages in Michigan, often to gas stations, where the consumer still pays the cost of the beverages plus the deposit. But you can’t return that can because it’s not a Michigan can.

Smith said these dimes could amount to tens of thousands of dollars per year in deposit costs for consumers. 

Most automated return machines won’t accept out-of-state cans. If a consumer  is able to return an out-of-state can to a retailer that hand checks them, some cases of fraud are not intentional. 

Many people who try to redeem their containers from out of state don’t even know it’s illegal, said Matt Fletcher, a recycling market development specialist for the Department of Environment, Great Lakes and Energy.

“I’ve gotten calls from Boy Scout troops in Illinois saying, ‘We’ve loaded up a U-Haul, and we’re going to drive up to Michigan to get the deposit,’” Fletcher said, “and I have to explain to them that it would be fraud, because the deposit has to be paid to get redeemed.”

Fletcher said the Boy Scouts had been collecting cans all summer for a trip. 

“They had $10,000 worth of dimes,” he said. 

Any fraud takes away from state unclaimed bottle deposit funds. 

Those are used to clean up and develop polluted areas in the state and educate the public about pollution prevention, Fletcher said. 

“It’s not the consumer’s role to figure out if where they bought it in Michigan is complying with the law,” Fletcher said. “Ultimately the main environmental impact of fraudulently redeeming containers would be that it weakens the system and takes away unclaimed deposit funds that are used for benefits in Michigan.” 

The addition of a hotline could reduce instances of fraud, Smith said. 

“If a can doesn’t say ‘Michigan 10 cents,’ you need to have somewhere you can report that so that the bottle bill can be enforced,” he said. 

Smith said another violation comes from retailers throughout the state that still haven’t opened up their bottle return facilities.

“They shut them down during COVID, which was totally reasonable,” Smith said, “But they’ve since failed to reopen those facilities, despite the fact that the rest of their business is back open.

“That means they’re denying you the opportunity to utilize that facility.”

Since October 2020, the return program has been fully re-established. 

Businesses are required to have facilities open, and can’t refuse returns or restrict their hours to impact the return of bottles, said the Department of Treasury. 

But the total number of violations throughout the state isn’t tracked by Treasury, said Ron Leix, a deputy public information officer for the department.

Smith said the hotline could also be used to report nonoperational facilities.

“We haven’t taken a formal position on the bill yet, but are very supportive in concept,” Smith said. “I want to make sure when we create this hotline that we’re not reporting our neighbor dropping a can in the trash.

“We’re really trying to generate info and intelligence on systemic problems with the implementation of the law,” he said.