If opponents of “big government” are ever to take a principled stand against government regulation of business, this case is a good place to start.
Find out why by reading Don't Regulate the Innocent, Punish the Guilty.
Be sure to read Mel_M.'s comment and my response in the comments section concerning "where valid law ends and regulation begins." In this regard, I'll quote from Harry Binswanger's essay, What is Objective Law, which I linked to in my response:
Objective law is based on the primacy of existence; it reflects not anyone's will but facts. In this sense, objective law is passive: certain definite areas are clearly marked "off limits," and unless one crosses the line, the law respects and protects one's freedom of choice. Non-objective law is active; it is a beast in motion. Its "flexibility" makes it the indispensable tool of dictatorships....
Objective law is men's protection against power-lust. Objective law does not require submitting to anyone's will; it exists to prevent others from substituting their will, their plans, their judgment for one's own....
Accordingly, all regulatory agencies---all the alphabet commissions and boards from the original ICC right through the latest "environmental" agencies---are inherently non-objective by virtue of being regulatory agencies. Regulatory agencies deal in preventive law, law that treats men as guilty in advance, requiring them to satisfy the government that they will not bring about a certain result, in the absence of any specific evidence that they will do so. Thus, businesses have to satisfy the FDA that they will not sell adulterated food and drugs, satisfy the SEC that they will not "take advantage of" investors, satisfy the FTC that they will not "attempt to monopolize," satisfy the EPA that they will not "injure the environment," satisfy the EEOC that they will not "discriminate" in hiring . . . and so on, without limit.
The premise of regulatory law is: since some individuals may act irrationally and irresponsibly, all must submit to supervision. Thus regulatory law sacrifices virtue to vice. Objective law is designed to protect the very thing regulatory law crushes: independence.