That might be true if we lived in a world where companies behaved like that. But given that they now answer to shareholders and the admitted priority above all others is to squeeze every possible cent out for those shareholders in the short term and that ignore long-term health, I don't think the principal really applies any longer. Public companies or companies courting IPOs are literally not permitted to behave in the way you describe.

Also the free market is a complete myth. The market is constantly manipulated and distorted by those controlling the capital via methods such as monopoly, monopsony, trusts and vastly disproportionate "influence" over law makers and potential regulatory power.