Isn’t that unethical though? Preserving the right to make arbitrary decisions and favor some people over others? Most of the entire human history of conflict seems to be because of this reason of arbitrary unfairness.
What you're referring to is the application of power, and their retention of arbitrary power, specifically.
Ethics is if they used that power for abuse or an unethical goal, or to acquire an even larger amount of arbitrary power.
Pragmatically, it's their app store, and they need to retain a non-trivial amount of power to police it. It's a requirement of ownership. If they don't do so, it will devolve to an even worse garbage dump, and rather quickly.
We're of course going to complain about inexplicable rulings, things we don't agree with, etc. but that doesn't change the equation unless they get so obnoxious that other places are more attractive or it violates some law.
For the one in 100k poor guy who got on the bad side of the AI this seems like a raw deal, but if you tweaked the system to avoid it, you'd probably end up with something 5 times as expensive and 10 times as slow. Queues of weeks to get your app approved kind of slow.