Double blind review allowing arXiv submissions
Wouldn't that effectively constitute a violation of the double-blind
  review policy?


Clearly not, as they state that it doesn't violate the policy.

Does it break double-blinding? Yes. But the intent is clearly to allow those who submit preprints, are in fields where conference proceedings are a thing, etc. to still be able to submit. It's essentially a compromise position of "Double Blind where possible, but we're not going to kick you out if you've broken it through the standard course of research."