In the extreme form of a free market (some would call that 'in a truly free market'), there is no such thing as regulating out bad behavior because, that is a

In the extreme form of a free market (some would call that 'in a truly free market'), there is no such thing as regulating out bad behavior because, that is a limitation on actors' freedom within that market. As the view goes, even if everyone in the market agreed on what was bad and how to enforce the regulation, it would be wholely unnecessary to actually regulate such bad action, because all participants are rational actors who will naturally punish that bad behavior themselves by preferring a competitor over the bad actor. And yes, regulating poor behavior is absolutely picking winners/picking losers/picking specific companies to disadvantage/advantage, and not just because of issues with uneven enforcement. Determining which behaviors are disallowed and which behaviors will be policed by "natural market forces", especially when talking about modifying rules for a preexisting market, means picking winners/losers/who gets advantaged/disadvantaged. This is why encouraging/fostering competition is antithetical to making/maintaining a free market.