That would be more of an oligopoly. Capitalism and free markets are more or less the same thing. However certain forms of regulation and lobbying can result in oligopies also known as 'crony capitalism'.
No. Free markets are theorized in liberalism, capitalism is just a nice way to says that companies belong to people who bought the tools, not peopl who operate them. You can have a communist liberalism (the "liberal anarchism described by Decoeur is pretty close to that), or (better) something in between like in germany or sweeden and Denmark with 33% of the voting power is given to employees, with an annual prime given to them depending on reversed dividends. Germany have a free market but is not a 100% capitalist country.