Well it is and isn't.

All airlines will routinely overbook knowing that some will cancel or not show. The practice does allow the airlines to sell more schedule opportunities to passengers and protects themselves from always going out with some empty seats. Most of the time it works out, but often, IDBs occur. I can understand UA not wanting to increase the potential for IDB liability by giving out a free ticket after a flight has been sold out. IDB compensation comes out of revenue and there's no point in issuing an award ticket if that very fact will likely cause an additional IDB payout.

You may not realize it, but you may have well bought a ticket on an oversold flight and have benefitted from the overbooking practice. Someone who's bought a ticket is going to be usually mad if they're IDB'd, but even more mad if they found out they were IDB'd because UA gave out free tickets after the flight was already overbooked.