First, I am not a lawyer, etc.
As I understand it, Amazon is essentially a distributor. They have contracts with third parties (for example, publishers) who sell their goods through Amazon. I'm quite sure that part of this contract involves the publisher guaranteeing that they have the legal right to sell the books they have on sale.
The point here is that Amazon has a good-faith belief that the media they have on sale is legal. If it proves NOT to be, the fiscal and legal responsibility goes directly to the publisher, who signed a contract stating that it was.
When Amazon refunded the price of those books, do you think that was out of pocket? Maybe at first, but I'll be surprised if they don't go after those publishers for it.
Now, did they handle the rest correctly? Deleting the books directly off of the Kindles was definitely a Bad Move. It was possibly against the TOS and possibly illegal, but I don't know enough about either to be sure. It was certainly a bad PR move. As a Kindle owner myself, the fact that they can (and will) do that creeps me out. I'm sympathetic to the class-action suit idea. If I had owned one of those books and it had happened to me, I would be extremely pissed off.
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