The relevant rule gives the officials a lot of options. It says runners who obstruct may be disqualified, but it does not say that they must be. It also gives the referees considerable discretion in deciding whether (or how) to give redress to those who have been obstructed.
Given this, it seems their decision was consistent with the letter of the rules.
Section 4 of Rule 163: Running Competition. .
Any competitor or participant jostling, running across, or obstructing another
competitor or participant so as to impede his or her progress shall be liable to disqualification in that event.
The Referee shall have the authority to
order the race to be re-held, excluding the disqualified competitor or,
in the case of a heat, to permit any competitor(s) seriously affected by jostling or obstruction (other than the disqualified competitor) to compete in a subsequent round of the race.
Normally, such an athlete should have completed the event with bona fide effort.
Regardless of whether there has been a disqualification, the Referee, in exceptional circumstances, shall also have the authority to
advance a competitor seriously affected by jostling or obstruction or
to order the race to be re-held if it is just and reasonable to do so.
NOTE: Some factors to be considered when determining a disqualification include safety,equitable competition, severity of the infraction and resulting consequence