> if you go as far as to imagine the Mexican cartels being (eventually) legitimate businesses, the strong competition between them would not subside, so they would still fight each other

Exactly. Just look at the much larger market contested by the Apple/Google blood feud for an example!

This doesn't actually happen. The expense of running a private army makes a firm catastrophically non-competetive vs. the new flood of now-legal competitors selling at a much lower price.