Celtic branded the decision a “huge embarrassment for Scottish football” as Flanagan won his appeal against a two-match ban for his clash with Brown.
During last Sunday’s game Rangers defender Flanagan was given a yellow card after the incident by referee Kevin Clancy but was later given a Notice of Complaint from compliance officer Clare Whyte.
However, an independent panel decided the official got his initial decision spot on.
And that decision has enraged Celtic with a club spokesman saying: “This whole matter is a huge embarrassment for Scottish football.”
This whole matter is a huge embarrassment for Scottish football
Following the decision to not to ban Flanagan Rangers released a statement saying: “We obviously have concerns about the process, but we’re happy the correct decision has been upheld.”
And Rangers assistant manager Gary McAllister insisted justice had been done following the outcome.
“At the time, I agreed with the referee,” he said.
“I thought it was a yellow card. My impression was of a coming together.
“Our appeal was part of the due process.”
Celtic manager Neil Lennon had argued the offence was a blatant red card and a sending off could have changed the game, with the incident occurring while Rangers held a one goal lead.
After the game Rangers vowed to defend Flanagan “vigorously”, while also questioning why Celtic defender Jozo Simunovic had also not been issued with a notice of complaint following an off-the-ball collision with Jermain Defoe.
Before the decision on Friday to dismiss the Notice of Complaint against Flanagan, Rangers released a statement questioned the process.
“Once again, there seems intent to change the decision of a referee in a match involving Rangers,” the club said.
“There seems to be a steady erosion of respect for Scotland’s referees and the authority they are meant to enjoy under rule five of the laws of the game.
“The decisions of referees regarding facts connected with play are meant to be final, but referees are now routinely invited to change their decisions after a game has finished.
“It is particularly shocking that another Rangers player has been singled out for retrospective action and issued with a notice of complaint, while Jozo Simunovic, the Celtic player who used an elbow to fell Jermain Defoe, has escaped any kind of censure.
“Why did one incident escape punishment while the other is now deemed worthy of a red card?
“We cannot understand how these two incidents could be studied yet only one be considered worthy of punishment.
“It seems as if Rangers’ players are being held to a different code of conduct from players at other clubs.
“We shall vigorously defend Mr Flanagan and have also asked for full transparency on what matters are brought forward for retrospective action. Are those decisions being made even-handedly?”
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