alt Hacker NewsGoing through a retraction and blacklisting process is also a lot of work -- collecting evidence, giving authors a chance to respond and mediate discussion, etc.
Labor is the bottleneck. There aren't enough academics who volunteer to help organize conferences.
(If a reader of this comment is qualified to review papers and wants to step up to the plate and help do some work in this area, please email the program chairs of your favorite conference and let them know. They'll eagerly put you to work.)
That's exactly why the inclusion of a hallucinated reference is actually a blessing. Instead going back and forth with the fraudster, just tell them to find the paper. If they can't, case closed. Massive amount of time and money saved.