It isn't 'how' it works. It's something along with other many many things we may like or dislike, that happens in our complicated world. Evidently you can't resist the opportunity to push a political agenda.
Well, in terms of economic theory, he has a point. Markets usually don't take into account so-called externalities such as the environmental impacts of pollution (or individual loss of privacy) when setting prices. Perhaps a better way to view environmental (or data-protection) legistation is not as constraining the untrammelled workings of the free market, but as modifying the market mechanisms themselves to take certain externalities into account, so that they get factored into production costs instead of being passed on to society.
