This isn't theoretical; it can and does happen -- just not for every type of good or service, and rarely by accident. A well-functioning market has to be designed.
Analogy: the freest roads of all would have no lane markings or regulations. This would give you "freedom from" regulation, but wouldn't give you the "freedom to" do very much. Roads with rules and regulations aren't "un-free"; they just prioritize "freedom to" over "freedom from".
And in some places, of course, mass transit just works better. Markets, too, aren't for everything. But when government is going to intervene to control prices, without actually taking any responsibility for the provision of said goods and services themselves, then those price controls quickly become divorced from reality, and do little besides create deadweight losses in some places and black markets in the rest. That's a lose-lose proposition.
one problem with this is that 1) free market with no regulation leads to monopoly when only one competitor remains and 2) efficient markets are purely theoretical due to impossibility of having perfect information in the real world.