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This is naive and wrong. An example of this is Google Fiber and ironically Tesla. When Google Fiber came out, ISPs lobbied to sue Google and local governments to prevent Fiber from being available in their areas instead of competing. When Tesla tried to sell direct to consumer, dealerships sued to prevent it. Entrenched companies will always use the system to prevent competition. Regulatory capture is a term for a reason.

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I doubt there are any regulatory or legal restrictions that prevent newcomers from selling frozen potatoes.

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All of the FDA and USDA regulations and inspections.

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...which even my local CSA seems to manage. Not saying there isn't a burden, but it's nothing like laying fiber or laws which specifically ban direct sales of automobiles.

If there was big money to be made undercutting Big Potato, someone would do it. Even my CSA grows potatoes.

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The OP asked for examples of things that prevent ethical companies from outcompeting unethical ones and I provided a few. Hyper-focusing on potatoes doesn't invalidate that.

Your local CSA is also unlikely to be audited by the FDA unless they tried to go larger than your community.