Is this actually true?

As to your general point, I don't think the blame can lie with the consumer as the consumer almost always does not have the expertise to recognize quality and understand the consequences of buying lower quality. Nor can you expect everyone to be an expert in everything. Without that expertise, buying a more expensive product is a gamble while a lower priced one is at least a known quantity even if it isn't the theoretically best deal.

There is difference between the political power and the economical power. The economical power of the aggregate consumer is vast, but it's unconsolidated, and doesn't usually translate into the political power. The economical power of several centralized/monopolized producers is also vast, but it's consolidated and usually does translate into the political power. Plus, you know, class consciousness and all that — the gentlemen and the nobles in the Parliament may bicker and backstab each other, but the moment the peasants revolt against the Enclosure Acts, they put their differences behind them and start the hangings.

> Ultimately the manufacturer wins the horse-shoe battle because they are cheaper.

Yeah, but they can speed their victory up by paying the legislature (or straight up being a large part of that legislature) to crack down on those small-scale manufacturers. License the blacksmithing itself, require obtaining certificates of quality for horseshoes for sale, and tax shoe-fitting unless it's done with the authorized horseshoes — and that's only barely scratching the surface.