Oooo ... Interesting. I've pondered this myself and it's inverse: we are not free consumers because we only have market access to what is forced upon us by whatever crazy, sound, mercenary, experimental, practical etc notions the biggest corporations can foist upon us (good or bad ones). For instance (one of my hot spots upcoming ...), where are the options in women's clothing in America? Ponder this example, the men's side of major (affordable) department stores in America during winter feature warm shirts, sweaters, socks etc. The women's side, cutesy little socks, off the shoulder sweaters, and gauzy shirts. Another example, indispensable electronics are made of such cheap plastics materials that they gas-off relentlessly and overwhelm by heavily contaminating indoor air quality.
I'm not qualified in economics to even begin to address or discuss your question properly but my lay person's response to this, "Does it mean that the free market in reality can never be expected to do what it is supposed to, because it can never be free in the true sense," is a resounding, "Yes! This is what it means." I think the past situation with the tobacco industry manipulating product for their advantage regardless of consumers is a ... a template, a metaphor, a paradigm ... for what most American industry and business does--it was not an exception to the rule.
Although, there is a burgeoning counter-industry developing, partly due to the Internet and e-commerce, that is creating at least a bit of true market freedom, from the consumer's perspective at least. For instance, I eschew detergents for clothes, cleansers, and dishes--won't get near them. I used to have be very creative in means to avoid them and still get the jobs done, but now I can buy soap nuts online imported from Nepal that perform these jobs with safety to me and mine. This is just one example of the counter-industry that is developing. Another would be the counter-industry developments in the clothing industry that feature safe, sustainable and organic fibers. Well, that was fun.