Earlier quoted context omitted.
They certainly could, which is part of my point. Whether they do or not depends on the honesty, bias, and personal ambitions of the people running the agency. The empirical experience is that regulatory agencies over time gravitate towards favoring the big established players in the industry they're regulating. The economist term is "Regulatory Capture".
Not quite. Regulatory capture doesn't mean you like the big companies, it means you like the industry you regulate. So if you regulate coal mines, you probably think coal mines are good, whether they're large or small. If you're a highway regulator, it probably means you think highways are pretty awesome, but that doesn't mean you think only Detroit muscle cars should be allowed on the highway.
One of the common ways this works is that the regulator keeps adding more and more complex regulations.
It's counterintuitive that a major company welcomes or instigates added regulations that will cost $20M/year to comply with. But since that makes it more expensive to start competing companies, they can make a lot more money from their increasingly secure oligopoly position.