This is not just a case of squashing another passenger on against the United code of carriage and 14CFR. This was a flagrant and deliberate breach of FAA safety regulations. A child of that size is not allowed to be on a parent's lap and would have died had their been an accident or even possibly severe turbulence.
Why is the FAA complicit in these safety breaches by these large airlines by never taking action? If this had been a low cost carrier from the Middle East FAA would be threatening its operating license, but United always gets away with it.