That's been the practise for years, even when I was a kid back east. The newspaper didn't want the disposal problem, no recycling back then. Like a consignment store, the merchant pays only for what he sells.
Often the store owner would give you a paper free minus the top strip.
Ya, it's still the practice. Except at places like 7/11, where the driver will take back and record your "returns" when he drops the new set.
The circulation department also uses your returns to calculate your sales on particular days and manually raise or lower your allotment for the next month for each day of the week.