Amazon.com recently disclosed that it had settled a mysterious investigation by the U.S. Postal Service for a “nominal amount.” Amazon never revealed what the investigation was about, and didn’t specify the terms of the settlement. But now the details are coming to light.

In response to a Freedom of Information Act request by TechFlash, the Postal Service released its settlement agreement with Amazon. According to the document, the Postal Service contends that Amazon “improperly mailed products,” mainly from the video game category, from Jan. 1, 2006 to Jan. 31, 2009 and owes additional postage. Amazon disputes that contention but paid $1.5 million to the Postal Service to settle the matter. The two parties settled to “avoid the delay, uncertainty, inconvenience and expense of protracted litigation,” the agreement states.

The agreement (pdf, 3 pages) states that “Amazon disclosed a specific list of products mailed at the Media Mail rate; the Postal Service maintains that certain of those products did not qualify for the rate.”

According to the U.S. Postal Service website, Media Mail service is “a cost efficient way to mail books, sound recordings, recorded video tapes, printed music, and recorded computer-readable media (such as CDs, DVDs, and diskettes),”

The settlement is “neither an admission of liability by Amazon nor a concession by the Postal Service,” the document states. The payment by Amazon “fully compensates” the Postal Service, which has “closed its case file in this matter.”

Amazon did not immediately respond to a request for comment. The online retailer originally disclosed the Postal investigation in January 2009.

Interestingly, there was some speculation on TechFlash early on that Amazon’s use of Media Mail might be the focus of the investigation.

Perhaps it’s not surprising that the U.S. Postal Service, which is grappling with a huge budget deficit, went over Amazon’s accounts with a fine tooth comb to ensure that no revenue was being lost.

But with the U.S. Postal Service facing a reported loss of at least $7 billion this fiscal year, the $1.5 million payment from Amazon will be just a drop in the bucket.

Update: Amazon spokeswoman Mary Osako said the company has nothing to add beyond what's in the agreement.

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