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They didn't say, but my guess is they won't include free books. In a lot of cases, free ebooks are promos anyway.
They are tracking sales through many sources, including a variety of retailers, not just the publishers.
Small publishers may see more ebook sales relative to their own print sales, but I doubt that a small pub will still enough relative to other ebooks to land on the charts, unless that particular book is massively successful anyway.
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