The matter has prompted a rebuke from the NSW Fair Trading Minister, Anthony Roberts, who claims group-buying sites cannot simply blame vendors when they are caught running dodgy deals.The book industry has reacted angrily and HarperCollins, publisher of some of the major titles contained on the CD including those by J.R.R Tolkien, said its corporate solicitor ''will be ringing them today''.

The site, Cudo.com.au, this week advertised a $99 e-book reader that came with ''4000 e-books you can load from a CD''. Thousands of people signed up for the deal, but the company claims it discovered the books were pirated before orders were shipped.

Cudo's advertisement originally linked directly to a list of books that came on the bonus CD, and the list contained thousands of books that were still under copyright and available in stores. The site later removed this link from the advertisement, but the original ad is still visible in Google's cache.

''It's extraordinary ... there's piracy taking place on a grand scale,'' said Australian Booksellers Association chief executive Joel Becker when shown the list of books.

''It's deeply concerning to see Channel Nine and Microsoft involved ... two organisations where copyright protection is a major issue to them.''Cudo, which is a joint venture between Nine and Microsoft, said customers who bought the deal would be contacted and offered ''a higher specification e-book reader'' instead.

The deal was offered through a vendor called ''grabargains.com'', and the site shifted the blame to it.

''Despite the merchant's assurances that the offer complies with all relevant Australian laws, including copyright laws, our assessment of the 4000 e-book titles being offered determined this may not be the case,'' the site's chief executive, Mike Sneesby, said.

''It appears the merchant of this deal has breached the terms of their Cudo booking agreement. As soon as we determined this, Cudo took action to replace the merchant's product with a higher quality device and provide customers with a new source of legitimate e-book content.''

Mr Roberts was not buying that excuse. ''I don't believe that group buying sites can walk away from quality or compliance of the goods and services sold through their sites,'' the minister said today.Comment is being sought from the Australian Publishers Association and individual publishers including Hachette and Penguin. On Monday this website reported that while the popularity of group-buying websites had soared in the past year, so had the number of complaints, with the sites contributing to a 39 per cent increase in complaints in NSW about online shopping.

The complaints - more than 5000 last year - prompted a warning from Mr Roberts, who said group-buying sites would be closely watched this year to protect consumers from losing money on goods or services that are never delivered.

''The concept of group buying is brilliant, there is no dobut about that, and consumers can get some great deals, so when they are good they are good but when they are bad, the sites are a disaster,'' he said.

The group-buying sites have developed a code of conduct in response to widespread issues but there is no evidence that this has done anything to reduce complaints.