I don't think competition would solve this, because most people would just take the ads offer and from a business perspective there's 0 reason to offer an ad-free option.
Of course, consumers cannot possibly estimate the cost of ads. They can't tell how much of the stuff they buy is because they're influenced, or how many years of life they throw away by watching ads in the long run. Ads could be costing them 1 dollar a year, or maybe 1,000. But they don't know, and they sure as hell won't be paying 5 bucks for a product if there's a "free" ad version.
What does that even look like, practically speaking? Is sponsored segment an ad? Is wearing branded apparel an ad? Is doing a press junket for a new movie an ad?
Facebook immediately comes to mind. Does google even have an ad-free version? Youtube nominally does (though that doesn't stop channels from running their own).
YouTube and Gmail do. I have both ad free. Google search does not. Facebook only did in Europe afaik, but I’d argue it’s not priced fairly. I don’t use most of meta, but would love an ad free instagram. But even if I were in Europe, the price is 20 a month. If I used other meta products that might be fine as a bundle, but is absurdly high for just instagram.
Most newspapers require payment but have no ad free option either.
I fully understand YouTube on this. Banning promoted/sponsored segments would be censoring the creators. Practically it's also too difficult to draw a line.