Monday, 14 February 2011

Arbitrage Now!

I blame Newman:
A memorable "Seinfeld" episode features Kramer and Newman taking thousands of cans and bottles to Michigan so they can get a nickel more per container than they would in New York, but beverage distributors say there's nothing funny when it happens for real.

In Maine, which has a more expansive bottle-redemption law than neighboring states, three people have been accused of illegally cashing in more than 100,000 out-of-state bottles and cans for deposits, the first time criminal charges have been filed in the state over bottle-refund fraud, a prosecutor said.

A couple that runs a Maine redemption centre and a Massachusetts man were indicted this week for allegedly redeeming beverage containers in Maine that were bought in other states.

Thomas and Megan Woodard, who run Green Bee Redemption in Kittery, face the more serious charge of allegedly passing off more than 100,000 out-of-state containers - with a value of more than US$10,000 (NZ$13,221) - as if they had been purchased in Maine.

That's just the tip of the iceberg.

An estimated 90 million cans and bottles are fraudulently cashed in each year in Maine, costing beverage distributors US$8 million to US$10 million, said Newell Augur, executive director of the Maine Beverage Association.
The whole article's full of win, like this:
In the 1996 "Seinfeld" episode, Kramer and Newman hatch a plan to drive a truckload of cans and bottles to Michigan, because the redemption fee there was 10 cents, double New York's nickel deposit.

Kramer laments it can't be done. "You overload your inventory and you blow your margins on gasoline," he says at one point. But Newman offers up free space in a mail truck he has to drive to Michigan before Mother's Day - "the mother of all mail days," he calls it - and the pair head off. (They end up aborting the trip while chasing down Jerry's stolen Saab.)

"That was a very funny episode," Augur [exec director of Maine Beverage Association] recalls. "But this is not a laughing matter."

Officials estimate that up to one billion beverage containers are sold in Maine each year. Containers sold in other states, however, carry the Maine deposit stamp because it's not cost-effective to change labeling for each state.
The Seinfeld episode is one of my favourites. It's a shame that our students can't now be expected to have seen the canon; otherwise, I could just point to that episode when explaining arbitrage.

It's a tough crime to prosecute: they'll have to prove that the alleged arbitrageur didn't actually collect the cans in the appropriate jurisdiction.

I hope the same AP reporter gets assigned to the next story on overdue library book fines. Mr. Bookman could be referenced....

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