ALL (U)LCC airlines doing business in Europe heavily rely on this practice. Two-tiered cabin bag allowances (a 40*30*20 bag is included with the ticket whereas bigger bags up to the 55*40*20cm size otherwise perceived as 'standard'.incur a hefty extra charge) - are a core component of their ancillary-fee-driven business model that no one so far has succeeded to challenge in a higher court.
And I don't see this happening anytime soon. If this practice would blatantly violate EU regulations there would be (higher) court decisions already.