The true free market system is based solely on supply and demand. But no one expects the pure market system to work without some controls. Even Adam Smith in his "Wealth of Nations" wrote about the "invisible hand."
The invisible hand is thought to mean morality and ethics, without which, the better equipped capitalists could and would rob the less equipped producers and consumers in the market economy. And in fact, we have seen that happen over and over in the history of capitalist nations.
In the US we had the so-called robber barons: Rockefeller, Carnegie, Stanford, Hearst, et al. They ruthlessly exploited their employees and customers to gain disproportionate wealth for themselves. Most recently we had the unscrupulous mortgage lenders who led investors into giving them their hard earn cash for worthless mortgages. Bernie Madoff was one such lender. [See source.]
So, unfortunately, the big time players in the free market are just as unscrupulous as the general population. So government has to step in to protect the ordinary citizens who don't have the where-with-all to exploit other.
The Security Exchange Commission, for example, was formed to protect the small time investor from crooks like Bernie and Martha Stewart who was convicted of insider trading. And there are all kinds of rules and regulations on trade and business operations to protect the ordinary folk from scams and cheats.
In other words, the free markets is anything but free. It is highly regulated by laws, regulations, and rules because a free market just does not self regulate. It needs external regulations to survive.
Bernard Lawrence "Bernie" Madoff is an American fraudster and a former stockbroker, investment advisor, and financier. [Wiki]