That (wrong and stupid) argument goes like this: "We can't make it illegal to poison the water, because that would make the government big, and big governments do bad things like eugenics/Mao's Great Leap Forward/the Holocaust. Better to leave the water being poisoned, to avoid any risk of that happening!"

In this case it's "We can't require Google to ban obvious trademark infringements, because that would make Google's app store review onerous, and onerous review processes block legitimate apps like Netflix and Fortnite. Better to leave the trademark infringements there, to avoid any risk of those apps getting blocked!"