I’d argue it’s part incompetence, part a resource issue. The team reviewing new applications are probably nowhere near resourced enough to properly vet all applicants. We’ve seen it before where security researchers have gotten pretty blatant malicious applications approved. 

AFAIK, the review process is now highly automated and that’s why you quickly fall into issues when your application can be associated with things that break the rules and terms of the App Store. Hopefully you’ll be able to escalate the issue and get it approved once senior reviewers look at the case.