Essentially the apps have same package name but different signatures and the app store that installed it should be the only one to recognize and update it.
But Google is likely trying this dark pattern to sway people away from F-Droid or alt stores by making users uninstall these apps and install it from the Google Play Store.
It’s been going on for a while and is annoying af.
The package name is the unique id. If you want to distribute multiple variants (like two versions with differing signatures) they should not have the same identifier. If they are not the same the id/package name should not be the same.
Having different package names would also prevent the Google play store from trying to update it.