The free market is not perfect. There are times when the government has to step in. Pollution is the perfect example. In the 1960s, companies were polluting nonstop since the costs were paid for by society and not by the company itself. The government had to step in to make the polluters pay the cost by requiring companies to purchase equipment to reduce pollution. It is about making the companies pay the full cost for their product. There are other examples.
Product safety.
Worker safety.
Working conditions.
According to your logic, we should stop conducting health inspections at food processing plants. After all if some bad meat kills a bunch of consumers, the company will go out of business. See the system works!
Any time society bears costs that a firm should bear then the government must take action. To believe that free markets can run unchecked is a fantasy.
No rational person believes in a free market system without governmental regulations.