If this is true, and it might be so, the question to ask is what quality control tests did it fail?
No one is going to put floor sweeping powder in cartridges. In fact, you can bet that any cartridge manufacturer is not going to have any floor sweeping powder, because if they did, it would be an incredible fire hazard. And if they did get some kind of cast off powder that might have more than one kind of powder in the pile, it would be destroyed. There would be no way to control the pressure when the round was fired. It might squib, it might overpressure a cheap .38 and explode.
But what quality control tests might a lot of ammunition fail? First of all, ammunition lot numbers have not got the significance so many people attach to them. Depending on company policy, the lot number might change when the operator or inspector changed. The components and settings on the machinery are identical.
Several components might not pass a quality check for several reasons. The bullets might have weight differences that are more than the standard stuff they label with the brand name. Suppose they allow the bullet weight to vary by up to one grain for the .45 ACP load. Bullets that weigh less than 229 grains, or more than 231 grains, can't be used.
But those bullets aren't junk, they are still usable and still safe to load. The load won't group as well, but that's why they're selling it cheap.
Suppose they weigh the case or the assembled cartridge. Again, the total weights have an acceptable variance. Some lots exceed the brand name variance by a small amount. Make them into the cheap stuff.
This does not mean the ammunition is unsafe to fire, only that it will not shoot as precisely as the brand name ammunition. But most people don't use ammunition like Winchester White Box, or American Eagle, or UMC, to try to win matches. They shoot it for practice and for fun.
They might even grade the ammunition on its appearance.
I have no idea what standards they use to grade ammunition, I'm just using basic concepts reloaders like myself use to evaluate the ammunition we make. But the companies wouldn't release the ammunition if they knew it might be dangerous to fire. That's asking for a lawsuit.