Its more than that, without regulation you end up with a lemon-law market.
Lots of times the difference between an honest product and a dishonest one only becomes apparent years later. If the product is safety equipment you only find out if the hard hat works when someone drops the brick on your head.
The libertarian theory that self interest will drive people to make honest products has turned out to be utterly false. In fact it turns out to be quite difficult for a company that intends to do the right thing to do so. I once had to get a guy fired after I found he had goosed his response rates for customer support calls by deliberately setting the phone tree up as a maze.
People do all sorts of idiotic short sighted stuff. This hotelier for example got his pants in a twist over a bad review and now he has probably sunk his business completely.
Rational choice is not an empirical fact of human behavior. It is a modelling assumption that tends to give good results in certain cases. But it does not hold for corporations because the interests of the corporation are not identical to those of the employees. All those banks who go belly up because the traders get big rewards for raking in profits and face no consequences for a loss. I don't gamble with my own money but if you want to give me $100,000 to gamble with I am happy to take it to Vegas, find a roulette wheel and let you take 100% of any losses and 90% of any gains.