So you can take a book that is in the 70% bracket and make it permafree, and the Amazon bots won't flag it as gaming the system?
Correct.
I mean a human would understand, but will the bots understand? I know it depends on the bot's programing, but sometimes programs aren't set up to handle things correctly.
I've never heard of bots flagging a permafree book for this sort of thing. And besides, there's no money being made, so why would they? The royalty bracket is irrelevant. It's zero either way.
To the best of my recollection, the only times permafree books have been flagged is when they're in KU and the author is obviously violating the exclusivity clause. In that instance, the author is usually trying to promote the book on the same day the book goes live in order to get a bunch of KU reads before Amazon discovers the hustle and removes the book from the store. The book would only be available for a few days at most, but if the author had a huge mailing list and was able to motivate lots of KU subscribers to read all the way through, then it could be quite lucrative. Publish a new book every week, and you've got a business model, at least until Amazon gets tired of your shenanigans and locks your KDP account. Which does eventually happen, not to mention the possibility of having those KU reads taken away before payout or, if you're really egregious and stubborn, having Amazon take you to court in order to make an example of you. Even in this case, though, it's the violation of the KU exclusivity clause that is the
casus belli here, not anything specific to permafree.
This particular scam was only possible because the people at KDP doing the price-matching weren't the same as the people policing KU for exclusivity violations. The left hand didn't know what the right hand was doing, and this created a window of opportunity.
There many KU scams back in the day, and this was just one of them.
But a permafree book that's NOT in KU will almost certainly be okay with Amazon so long as it's not plagiarized or something.