>Why not? I understand that a lot of people don't like this behavior, but why should it be illegal?

Because these large companies are basically utility companies in my humble opinion, and wield a whole lot of power over people's lives and livelihoods. There are basically defacto monopolies in their respective spaces. This power and influence shouldn't go entirely unchecked. Same as we (try to) regulate other industries, often even players that are far "smaller" than the internet behemoths. Which brings me back to Eigentum verpflichtet.

>The law is a very blunt instrument, and government is already far too intrusive into every aspect of people's lives.

I see this argument a lot. First of all, we're not even talking about regulating people, we talk about regulating companies worth billions and sometimes even trillions, so I am a little less concerned about being "intrusive" there. And then, the law is quite often rather blunt, agreed, but it doesn't have to be that blunt.

Google's or Meta's "Community Standards" at the same time seem to be rather blunt as well, and the enforcement deliberately arbitrary.

>Some people, whenever they have a problem with behavior they don't like, think: Let's get the law/government to solve it! Now they have two problems.

At the least with the law/government[0], we have a theoretical control (through voting), theoretical checks and balances (through separation of power) and a theoretical way to have input into decision making (through activism, lobbying, opposition parties). We do not have any of that when it comes to companies.

And not everything the government does is always bad. The government is the reason you're drinking a lot less lead in your water, that we do not let regular companies sell heroin solution as cough syrup anymore, or that banks aren't allowed to redline black people anymore (whether enforcement works is another thing), or dump their toxic waste in your backyard. In my parts of the world, the government even made it so that I do not have to fear going bankrupt and homeless when I lose a job or become ill, or that an employer cannot knowingly assign me jobs that will make me ill without even telling me about that risk.

Yeah, there are plenty of things the governments did and still do that are not great, or outright bad and/or evil, sometimes because a policy didn't work out the way it was expected and lead to bad outcomes, sometimes because a policy had exactly the indented outcome. And it usually takes quite some effort and time to change that.

At the same time, there are plenty of bad things large companies did and are still doing, more often than not to maximize profits, or at least for power and influence, and the only real incentives we have to make them stop is market pressure (i.e. boycotts or protests, which hardly ever work) or regulation (which works quite well, but can have the side effect of regulatory capture). Take the instrument of regulation away, because it's too blunt, or the government cannot be trusted, or whatever, and we'll end up (again[1]) with a bunch of companies that are defacto governments - but of the dictatorial variety.

To me, the solution neither is no regulation nor always regulation, but finding a good balance of what and what not to regulate, and how to regulate. The power balance between those large internet companies and their users/customers/subcontractors and "gig workers"[2] is skewed very heavily in favor of the large companies and thus I think could use some unskewing by regulatory measures.

[0] When I keep talking about government(s) here, I mean our democratic governments.

[1] The East India Company, for example, while still technically beholden to the Crown, had their own military, and made their own defacto laws in large parts of the world. It took the Indian rebellion, with a toll of close to 1M lives, and the British Government to reign them in.

[2] I would consider a lot of the small time app developers to be essentially gig workers, except they write code instead of taxing you around, while a major chunk of the financial and other profits goes to the app stores.