A bunch of people here are conflating the concepts of "free software" and "open source". these are not the same. "Free" (as in speech, or beer) software is governed by the license it is published under. Open source simply refers to the fact that the source code is publicly available. Open source is a prerequisite for truly free (as in speech) software, but the opposite is not.
The court decision directly declares this false. The fact that AGPL+Commons makes code source-available (the source code is publicly available) but not open-source ( https://opensource.org/osd ) is the false advertising claim in question. If you were to design a source-available nonfree product, and call it 'open source', this court would find you guilty of false advertising. Not that this should come as a surprise,…
It's not really about any of that. If you read the court opinion, it's basically copyright protection infringement on the basis that someone copied a product and changed the licensing in violation of the original license. The false advertising claim is on the basis that the duplicate software is free and open source, because it can't be free and open source if the original license forbade that.