Asbestos is hard to hide, certainly competitors of the Asbestos-using company would know they were using Asbestos. They, at least, would have an incentive to advertise how bad their competitors product is because it uses Asbestos.
Equally, once it has been established that Asbestos is harmful any company using it would be so sued that they would quickly cease to exist.
Yes the free market doesn't stop health risks immediately but neither does regulation (see: asbestos!)
Both regulation and an actually healthy free market are important.
Both have pros and cons
Regulation sucks at directing productions of goods and setting prices, distributing these tasks to the people generally works better.
The free market is unstable though, its actors ever trying to gain advantage and squash competition. Profit first driven people too often push harm to humans as out of mind and externalized.
This is where regulation is needed. (read as: we the people need rules to protect what we deem important, including our health and having a well-functioning society, profits be damned)
Equally, once it has been established that Asbestos is harmful any company using it would be so sued that they would quickly cease to exist.
Yes the free market doesn't stop health risks immediately but neither does regulation (see: asbestos!)