The Transportation Department said it had found no evidence the airline violated David Dao’s civil rights following the incident at O’Hare International airport in Chicago on April 9.
Mr Dao was filmed in a video which went viral online being pulled from his seat and dragged down the aisle of the jet.
There was also not enough evidence the airline violated rules regarding bumping passengers to take the case further, the department said.
United were informed of the decision more than four months ago but opted not to make the news public. The letter was released this week after a request by campaign group Flyers Rights.
Paul Hudson, the president of the group, criticised the lack of penalties against United and questioned how the Transportation Department could conduct an investigation so quickly.
He called the manhandling of 69-year-old Mr Dao “egregious in every sense of the word”.
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Mr Dao was waiting to fly to Louisville, Kentucky, when the airline decided it needed four seats for Republic Airline crew members who needed to travel to work on another United Express flight in Louisville the next morning.
When Mr Dao and his wife were selected for bumping, he refused to leave and video of the incident was viewed millions of times.
In the two-page letter to United, Transportation Department Assistant General Counsel Blane Workie said the agency takes action when an airline repeatedly or egregiously violates consumer-protection laws.
She said United fixed one mistake in calculating compensation for another passenger, and failed to give Mr Dao and his wife a required written notice of their rights only because they had left the airport to seek medical help.
“Therefore, we conclude that enforcement action is not warranted in this matter,” Workie concluded.
She said the agency found no evidence that United discriminated against Mr Dao, who is Asian-American, on the basis of race.
United avoided a lawsuit by reaching a settlement with Mr Dao a few weeks after the incident and terms of the settlement were not disclosed.
The CEO of United Continental Holdings Inc., Oscar Munoz, apologised for initially defending the airline’s handling of the incident and blaming Mr Dao, who lost teeth, suffered a broken nose and was left concussed.
The airline apologised for the incident again on Wednesday and said it has made changes to reduce overbooking.
“This incident should never have happened and we are implementing all of the improvements we announced in April,” spokeswoman Megan McCarthy said in a statement.
The company said it had made “meaningful strides” and reduced the bumping of passengers by nearly 90 percent since May 1, compared with the same period last year.