Earlier quoted context omitted.
But an inherent bug of government regulation is that it's always vulnerable to lobbying like you cited. So it's still a failure of regulation, except one that is permanent and unsurprising.
Are you arguing that it was a failure of the government regulation by allowing the self regulation that caused the mess?
If a suspect nicely asks a police officer not to arrest them, and the officer complies, that's a failure of policing.
The only difference here is that the vulnerability of regulatory bodies to asking nicely is so well-recognized that it has a fancy name ("Regulatory Capture"), and is backed by loads of published research, and quite frankly is probably the reason that the business class even submits to this sort of regulation at all.