So you can legally burn a US flag, but you can't display it lower than another country's flag...makes sense.
ACLU to chime in with .02 in 3...2...1....
I think the owner did not mean to be disrespectful, didn't realize he was technically breaking an unenforced and probably unenforceable law, thought he was actually being respectful by flying both flags, probably didn't give much thought to which flag has superiority over the other, doesn't understand who that scary bearded guy with the knife was or where he went with his US flag.
And last time I checked, it wasn't illegal to think or express an opinion that another country was better than the US. If one intends to express that sentiment by flying another flag above the US flag (not his intention here I don't think) it should be legal.
Some people on here seem to be of the opinion that someone else should be able to destroy or steal your property if they disagree with your views or feel you are being disrespectful to the country. Sorry guys. This country is great specifically because it allows you to publicly display your disrespect without fear of retribution.
If you want to live in a country where dissent is illegal, there's a few I can recommend.