It's "allowed" to be manufactured and sold because there is no pre-vetting of everything that is manufactured and sold - that would be impossible, wouldn't it?
However people do have an erroneous belief that if something is for sale, especially if it is marketed/designed for babies, that it must have been through some kind of safety panel and deemed to be safe.
Unfortunately the warning is necessary because some people won't see the issue.
Interestingly I also remember warnings about this kind of thing going back years to when my teenager was a baby, so it must be one of those things that pops up every now and again, somebody thinks "That would be a great idea, I wonder why nobody else has done it!" and creates a shoddy product, starts marketing it all over the place and it's only when it actually starts to cause harm that anybody official gets involved and puts out a warning about it.
The problem is worse now, I think, because cheap shipping methods from overseas combined with selling platforms like amazon have made it totally easy for dubious products to come over from abroad where there might be less care for safety than is taken for granted in countries like the UK.
If you were going to launch a new product on the UK market as a business you'd probably seek legal advice first to make sure it was all OK and unlikely to end up in you being sued - whoever has made and designed this obviously hasn't done that, and that's probably because it's easier than ever to get a product out into the world via online sales.