This is by far the most ridiculous reasoning I’ve seen for a company being too big. Because too many users get restricted from the service unintentionally then the provider is too big?
Some regions floated right to explanation and right to human review for automated processes. I don't know if any passed, but if they did, it would definitely mean the service has to take it into account.
You have summed it up quite nicely, but I don't see why it's so ridiculous? If the social costs incurred by corporations past a certain size become unacceptable, why shouldn't we, as a society, limit their size? There's no natural right to form an LLC.