Would people just let a man grabbing a woman and spanking her happen?

He didn't say "grabbing", and in context, I'd guess that by "spanking" he meant a single swat to the buttocks.

The story is so far off from my priors of how people behave that I think the possibility that it isn't true should be considered.

It says more that you don't get out much, or aren't very observant when you do. I don't get out much, and never got out much, even during the brief few years when I was both single and of age, and such a story as this one is so utterly mundane and commonplace in its elements as to seem scarcely worthy of comment in the first place.

Most guys that protest such behavior from women make some other form of scene than swatting, of course, and most simply whine to their buddies or suffer in silence rather than make a scene at all. But apart from that, it's an utterly ordinary story, and observable many, many times a night in any "meet market" where the women go to dance and drink, funded by deluded potential suitors.