The Match Review Panel cleared O'Brien on Monday and AFL umpires manager Jeff Gieschen said the umpire had made a mistake.
"When we've reviewed that, we can clearly see that Luke Hodge did elect to go to ground," Gieschen told AFL.com.au.
"When he went to ground he had a bit of momentum, and he made contact to Harry O'Brien below the knees, causing Harry O'Brien to topple over. That's one of those ones, [a] mistake by the umpire. It should have been a free kick to Harry O'Brien."
After Sunday's game, Magpies coach Nathan Buckley branded the O'Brien report a test case for the new rule.
Buckley said whichever way the decision went in the O'Brien case, he hoped it would bring some clarity to the way the rule would be adjudicated during the season.
He said Collingwood players had been instructed to keep their feet when contesting a ground ball.
"Otherwise you give a free kick away," Buckley said. "Harry (O'Brien) was doing what he is required to do in that situation."
The AFL decision indicates that any player who slides into a player who keeps his feet will be penalised.
However, the rule will remain contentious as players, coaches and umpires become used to what is and isn't a free kick.
Hawthorn coach Alastair Clarkson said the rule was a minefield for umpires, particularly on wet days, although he expressed surprise that O'Brien had been reported for making contact with Hodge.
Some have also called for an end to umpires making reports during matches but Gieschen said they would continue to encourage umpires to report players if they saw a reportable incident.
"We encourage our umpires to make reports on the day. Our umpire saw O'Brien running at Hodge. He believed he saw him make high contact from front-on so he summed it up that way," Gieschen said.
