Mozilla is unhappy because the use of browser engines other than WebKit will be restricted to the EU, forcing them to develop two different apps.
For an independent browser like Firefox, managing two browsers is not easy, so it can be forgiven that this could be seen as almost harassment.
Also, the fact that the use of browser engines other than WebKit is limited to iOS means that the use of WebKit is still forced on iPadOS, which also increases the effort for Mozilla.
You seem to think that regulation doesn’t work. Luckily, we have a test case set up for us in real-life.
In the United States, consumers relied on voting with their wallets. In the European Union, regulatory agencies forced Apple to take pro-consumer moves through regulation.
Now take a look at which approach produced results and which approach left consumers continuing to complain about the lack of interoperability and the lack of competition in Apple’s walled garden.