The entire snake oil industry was thriving and customers loved buying stuff that did nothing at all.

It took a hundred people, including young children, dying in sheer agony from a 100% preventable poisoning by a "medicine company" who's business was essentially dissolving off the shelf medicine powders in liquid and selling the result to really regulate chemicals meant for human ingestion. It took a president with a sympathetic ear and immense popular support for government in general to be a force for reigning in powerful corporations.

That company not only did not test that concoction on any living thing before bottling it up and selling to thousands of unwitting people, but the chemist in charge didn't even check the literature to see that the diethylene glycol he used was already thought to be lethal and had known kidney toxicity.

The company DID test its flavor and color and fragrance.

Why would they test anything else before selling it? You could be a hugely profitable company selling products that did nothing to the people who took it. Testing your products was a waste of effort and would not get you more business!

Your average consumer CANNOT judge accurately whether a medicine works. Your average doctor fails at the task, which is why we have to do blind studies in the first place.

What was true of consumers in the early 1900s is just as true today, and applies to all sorts of things that aren't medicine. Consumers will never be experts. Consumers will never be as equipped to evaluate something as the capital rich industry that produces it. There are inherent information asymmetries that make even idealized market theory fail.