Hello crafty, sorry I haven't gotten back to your earlier reply yet. Your response had good points and I couldn't dash off a quick answer while out of town.
The video you mention is ugly. I think it is a fair example of what bad private security can look like. I don't think this is typical behavior of loss prevention employees. Casual research suggests that employees are usually instructed to confront suspected shoplifters but let them escape if necessary to avoid violence (though detention using force is legal in some states). It's not hard to find examples of excessive force used by police officers, even in Canada.
I don't argue that private security gets perfect results, only that it may be a preferable alternative to public police. When you give someone a job to "stop bad guys," there will be abuses. In which case, public or private, are these abuses more likely to happen? When they do, in which case, public or private, are the abuses handled better?
This incident happened recently (at the Edmonton West Supercenter, according to a comment) and I can't find any information about what happened next. But I strongly suspect that these two loss prevention employees will be fired. It is also possible that Wal-Mart will pay a settlement to the guy they detained when he sues for battery and his lawyer argues that the knife came out in self-defense.
Imagine that it was a public law enforcement officer who roughed up a suspect who was resisting. If an eyewitness video led to an investigation, the officer might be placed on "administrative leave," i.e. paid vacation. Who has more to lose by violating rules and beating up a suspect, the employee or the cop?
Wal-Mart has a public image to worry about. People in Edmonton can shop at Target, five kilometers away. But they have no alternative other than to rely on the Edmonton Police Service. When considering public opinion, which organization has more at stake?
You mention that boycotts are not always effective. But they are something. How do you boycott the police? If you decline to pay for their services, they can come and arrest you. They not only have monopoly power to provide a service without competition, but authority to force you to be a "customer." And when abuses happen, the doctrine of sovereign immunity can leave victims with little recourse. After a SWAT officer threw a flashbang grenade into a crib, the family has received no medical assistance, no apology, "No card, no balloon, not a phone call, not anything."
How does the free market address the situation where the person paying for the police-force is not the same as the person receiving the police-force?
In this case Wal-Mart paid for security service, and Wal-Mart received bad security service. This outcome is almost certainly worse than letting the suspect get away. Wal-Mart will fire these clowns and hire better employees. How much more effectively could the market work?
If the guy being detained stole from the store, he is not a customer (sort of the opposite). He is not exactly an innocent victim, but in any case he can navigate the Canadian Department of Justice if he wants to seek redress. He can hire a lawyer to represent his side. If he can't afford a lawyer, he can try Pro Bono Law Alberta. What more can you ask of the market?
It's a situation where one dollar is one vote.
This is a glowing feature of the market. We try to solve some problems with democracy, the worst form of government except for all the others. Not everyone gets what they want in a democracy, but a one-size-fits-all public policy is supposed to please the majority. If people are not pleased, they can (after four years) look for a candidate who makes promises which appear likely to give better results, and cast their vote. If that's too slow, they can write as many letters as they like to the current representatives.
Every dollar you spend at Wal-Mart supports Wal-Mart and their policies, helping Wal-Mart grow. Every dollar you spend at Target supports Target, slightly starving Wal-Mart. Even if you have niche tastes, if there are some others like you there will likely be a business catering to your interests. If not, you can start the business yourself.