This is what's known as "
regulatory capture", and it's an inevitable result of a system that's based on the idea that State regulators are better able to decide how things should run than the private sector.
Consider this. Somebody sees that industry X is doing something that might be bad for the society (and maybe that person's even right). So the government creates and agency designed to keep an eye out against industry X being abusive.
But who is going to work for that agency? You aren't going to hire any Joe off the street, you need somebody who understands how the industry works. And where are you going to get that except from people who used to work for the industry?
The thing is, those people who used to work for industry X -- even if they're trying to be impartial and above corruption -- will naturally have a certain view of the importance of that industry, and are likely to have preconceived notions that it needs to operate in some manner close to the status quo.
Once you've gone through a few terms with such people running that agency, you'll find that the regulations that are being passed tend to ensure that business keeps getting done more or less the same way, because that's what they understand about the industry. And even more to the point (and even more likely), their view of the industry's importance will lead to creating of
rent seeking regulations that fortify the power of the industry's leaders, protecting them from any kind of competition.
And like I said, it's pretty much inevitable. It's a natural consequence of the fact that for the regulators to do anything that makes sense at all, they need to have industry experience. And anybody with some experience is bound to have established ideas already, and they're bound to have a world view that considers the industry very important (even if they've left the industry because of disagreement with certain businesses within it).
The only way to prevent businesses from capturing the regulatory agencies like this is to strictly limit the power of those agencies, so that there's nothing there to be abused.
So pick your poison: a system in which industry X is largely free to do business however its customers will let it get away with; or a system in which the leaders of industry X are virtually guaranteed continued power, because the regulators ensure that nobody can shake them loose.
Skeptical? Look at the finance industry.
