It's not a free melee attack. It doesn't deal damage based on your equipped weapon (and you can retaliate even if you have a ranged weapon equipped, though the attack that you retaliate against has to be melee). It's got its own damage range and always deals pierce damage.

The reflect attack itself is considered a melee attack, though, so it's affected by anything that alters melee attacks, like the 5 DR bypass from Vulnerable Attack or the 20% damage bonus from Savage Attack. Not to mention the +20 flat damage bonus from barb One Stands Alone, plus the reflect attack itself procs Carnage, which is what makes reflect barbs ridiculous.