How often does this actually happen? People have been studying capitalism for more than a 100 years and this argument has been rehashed for a long time. Free market capitalism will only allow a startup to gain ground via innovation and offering of a superior product or service if the market is not totally free and monopolies are not allowed to form. Monopoly is the natural end state for capitalism.

Furthermore, the company motivated by profit that does not have to pay for polluting the environment will also pollute the environment. Regulation is also necessary to pay for long term externalities and other boom and bust cycles. There is nothing new in PG take except COPE and blame shifting about the increasing inequality and other societal and environmental issues.

In my view, there is no such thing as free market capitalism without regulation. The only thing that could create anything resembling a "free market" in the first place is regulation. The whole point of the endeavor is to enact regulations that essentially play whack-a-mole in making every means of profit illegal, except for means that serve the greater good, i.e. producing, serving, innovating, and/or lowering prices, or investing in those that do.

Without regulations (just a fancy word for "laws"), few people would bother to do any of these things. As it would be much more profitable to simply sabotage competitors, form cabals or monopolies, oppress and steal from the populace, conquer and loot your neighbors, lie and deceive and trick your partners, etc. And even if it weren't, anyone who did want to truly innovate or produce something useful would be discouraged by the fact that, due to others engaging in the above activities, they wouldn't see any profit.

So, to answer your question…

> How often does this actually happen?

All the time! Hundreds of thousands of times per year! Because we don't live in an unregulated free market, because there's no such thing and the concept is absurd on its face.

There are plenty of gaps and inefficiencies where new businesses can provide value to customers at scale who will happily part with their money in return.

Not to mention the fact that the constant march of technology (as well as changes in policy, culture, environment, knowledge, etc.) are constantly tearing open new holes in the market.