It's such a common thing to do that sometimes I feel dumb for paying for all the e-books I get -- all but the ones that are legally free, like promos or out-of-copyright books. However, I think about the authors. They've worked hard. If I really want a friend to read a book, I buy a second copy. ARe even has a gifting option, which I'd love to see on other sites. If I have it in paperback, I'll loan it out. With mainstream romance authors, I can get their books at the library.
I think the author is basically in the right, though I'm not a lawyer or anything. I think some fans will have a problem with the way she's going about it. I know that I've paid for the books I've gotten.