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No, her book wasn't free.
Yes, the issue is that some publishers are trying to give royalties for ebooks based on retail price rather than list price. The entire reason why list price is used for pbooks is to avoid the problem of discounts.
The $0.00 issue is usually covered under a special deals and promotions clause, so there's no need to make ebooks based on retail price to avoid publisher losses just because they want to give away a free ebook for a while.
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