The "free market" concept is a theoretical economic concept that is seldom found in the real world. In purely economic terms, a free market exists when every seller and every buyer have equal access to a market and are trading identical products. This mythical market situation is used to demonstrate the concept of "supply and demand".
In the first economics class I took several years ago, the teacher used shoes as the example product.
The classic example is where you go to the flea market to buy a pair of shoes. You get there and find a bunch of people selling shoes, and the shoes are the same quality, and the dealers have invested the same amount of money per pair, and ever customer at the market wears size 9. There is absolutely no reason for the buyer to pick one seller over the other,
The theory says that in this incredibly unlikely situation, the price of the shoes will be determined by a ratio of the number of shoes available to the buyers and how important buying a pair of shoes is to the buyer.
in real world terms, this is the purest of BS. Free market fundamentalism defines the free market as a marketplace free of government imposed restrictions instead of a market that provides fere access to all sellers and buyers.
In an unregulated marketplaces, some dealers will gain market share over others. They can hen leverage the market share to a competitive advantage. ( e.g. a convenience store chain may sell gas as a loss at a few stores to attract customers away from competitors stores across the street. They compensate by rasiing prices slightly at stores with no nearby competition, and effectively subsidize their own stores.).
Eventually an unregulated market results in the eventual rise of monopolies and oligopolies (a.k.a. cartels).
The real problems arise when monopolies and cartels can control access to basic necessities of life, like food, water, housing and clothing. When this happens business practices cross the line into extortion.
In 1999, the Bechtel corporation in California, contracted to manage the public water supply in a Bolivian city. At one point, Bechtel even laid claim to rain water that fell on the city in an effort to completely control all water sources for its profit. Read about it <a /href="http://www.corpwatch.org/article.... and <a href="http://en.wikipedia.org/wiki/Becht... >here</a>.
The role of government is to regulate businesses in a way that supresses or prohibits cartels and monopolies while promoting fair competition.