"Free Market" not so "Free"?

When proponents of the "free market" push for
deregulation, there is the underlying assumption
that "free market" is the best form of economic system,
always. This erroneous conclusion, however,
rests on two faulty premises.

Myth Number One:
Free market laissez faire economic policies will always
produce the maximum amount of competition.

This is patently untrue. Absent regulation, certain
industries will produce lop-sided and deeply unequal
concentration of market power in very few firms.
One example was the U.S financial system before the 2008 crisis.
Due to a lack of regulation, a couple of financial intermediaries
such as AIG and Citigroup were allowed to swell to a massive size -
with their balance sheets ballooning into the trillions - until they became
too big to fail.

For another example closer to home, Joe Studwell points
out that the lack of competition law in Hong Kong has allowed
for the emergence of cartels in several industries such as
real estate and port-handling services. They have become
de facto playgrounds for the big boys.

While still alive, Milton Friedman was a big proponent of Hong Kong's
economic system which he praised as a bastion of the free market.
Somehow, he managed to dismiss evidence that free market does
not equal to freely competitive.

Myth Number Two:
The maximum amount of competition will always produce the aggregate best outcome.

I agree that it wld, in most cases, produce the best
economic outcome. Yet, it hardly produces the best social outcome.
Another irony of the financial crisis is that while some
firms became too big to fail, other financial institutions
failed because they competed too fiercely. In the race to chase
profits aggressively, some firms like Merrill Lynch, Bear Stearns,
Lehman Brothers (notice that none of them exist any more)
went on a crazy lending spree to borrowers who could not pay them back.
When the loan losses mounted, they were forced to fold.
In a crazy twist of fate, they got bought out by firms which
in turn became lagi too big to fail.
By allowing firms to compete as fiercely as they did,
these firms ultimately dug their own grave, and eventually
the whole system had to be rescued by the government.

Why am I writing all out this?
I am trying to point out to proponents of de-regulation that
there are chinks in their armor.
Competition is not always a good word, and regulation is not always a bad word.