You are getting this message because your Luminate instance is integrated with a CRM. Duplicates should always be managed in your CRM as a best practice, so this feature is disabled as long as you are integrated.

If you use LCRM, then refer to How Are Duplicate Records Synchronized (BB735350).

If you use RE-LO, then refer to How to merge duplicate records when integrated with Luminate Online Marketing (BB748826).