Right now, you can choose between getting Facebook from Apple's App Store, where Facebook has to comply with fairly strict privacy rules to remain available. Or, you can use Facebook on a non-Apple platform where no such rules exist (browser, Google Play). This choice exists because the App Store is the only way for Facebook to practically deliver its product to iPhone users.
If Apple is forced to allow third-party stores, then yes, users have more choices on where to get their apps. But it would allow Facebook to take their app off the iOS App Store and put it somewhere without Apple's stricter privacy rules, taking away the users option to choose a version that doesn't have things like cross-app behavior tracking.
I view it very much as a "pick your poison" scenario, where Apple is merely the lesser of two evils. I would much rather live in a world where government regulation renders Facebook's shitty business practices obsolete, then Apple wouldn't be able to use basic rights like privacy as a product differentiator.
I have an Android phone and I almost always install apps from the store but I have a very important handful of apps that I've sideloaded (or gotten from F-droid). Some of those apps do more to ensure my privacy than "official" ones.
The problem is, Facebook could easily take the iOS App Store option away and make the alt-store option mandatory. And they have the power to do so and get away with it. People are too entrenched in their ecosystem, and there's no viable path off of it. User protests like this on social media rarely end in favor of the users.
I'm one of the people that quit Facebook entirely, and it does actually hurt me IRL. Too many friends and family members coordinate events and share news exclusively through Facebook.
I feel like the argument falls a bit flat when sideloading exists on Android, Android has 70% of the global market share, and none of these supposed evils have happened.
In the US, if Android side-loading were more common, we'd already have this, except that companies would require it.
In the EU, they'd probably crack down on companies that tried to do this. However, although it's technically illegal for governments to do such things, apparently most governments routinely break the anti-mass-surveillance laws.
On iOS, Apple has banned many bad actors for such shenanigans (although they still allow spyware from large companies like meta and google).
iOS != App Store
The whole point is that the EU wants to take away Apple's ability to vet apps, since that's created an anti-competitive situation.
However, this doesn't have any bearing on the argument that user freedom doesn't significantly compromise security - this just shows that the EU made a bad law.
This is like some weird 1984 double-speak. How does letting users install Apps from more stores "reduce their options"? Would you have "more options" if I told you that you're only allowed to shop at Amazon.com and your browser will block any competing online retailers? Are you being harmed by the fact that you can buy products from more than one online store?
And the whole secondary argument is some kind of joke right, as 80% of every "free" app in the App Store requests data on your location, sensitive privileges, and all of them use coercive techniques to trick users into accepting. Whatever approval process Apple is is using with the App Store is far from protecting users.