Politicians decide what's illegal. Legislative decisions are frequently ethically repulsive if not crooked. It's usually circular logic to point to text on paper as justification of anything, especially in the context of ethics and discussion.
Answering your question isn't simple. I foremost think about how the lawmaking process itself could be changed to make it significantly harder to create superficial laws: the type of laws that interfere with consenting people; the type of laws largely responsible for so many prison economies and victimless "crimes." This doesn't answer your question. This is to say that it's a good question and it should be thought about.
At least for the latter there are regulations in place in the taxi market here in Europe.
Finally citizens can decide. Vote for politicians which going to make change injust law (or what we see as injust). This works at least sometimes. Homosexuality was a criminal offense in most countries forty years ago.
Frankly, that's a cop out, because you'd be insane to vote for the politician based on his/her opinions on taxi regulation laws. Our political systems simply don't allow real choice.
And even if you count voting in a broad direction as having real choice, that still doesn't work, because we have no pro-"free markets" party in this country.
So, no, we can't.
So is saying that the rules can be broken because there are no parties who would remove them. European democracies generally allow people to form new parties, and I don't belive Portugal is an exception. If the population was pro free market, there would be parties that are pro free market. If there are no such parties, that is because the population doesn't support that idea.
Because people are terrible at assessing risk and would chose cheaper cabs rather than insured cabs.