Technically, they only had permission to use the song, not the voices of the band. So their very successful attempt at imitating the group goes beyond the scope of the agreement. In a very fucked-up way, they actually have a leg to stand on legally. Not sure how well it would hold up, but if they're found to have purposefully tried to imitate the band and did a spectacular job of it (I thought that was the point of all covers?), they could be held in breach of contract.
I was there on that fateful day, were you?