I understand where the OP is coming from. When I decided to bottle my BBQ sauce I did it the right way. I had it lab tested, got my own UPC barcode and #, had a co-packer make it for me etc. All of which cost me roughly about $5,000 of my own money to get started.
Yet I know three people right now who make their own bbq sauce in their home kitchen and sell at some of the same shows we go to. However, the problem for them is they've limited how far they can go by cutting corners. They cannot get into the Kroger stores (like I have) because you've got to have UPC barcodes and number, proof of insurance etc. So in essence I have nothing to worry about because they've cut their own throats with regard to future success.
I think it is the same with these people the OP is talking about. Consumers aren't stupid. They can quickly tell the difference in a legit, professional operation compared to someone who's trying to fly under the legal radar. By cutting corners these folks have already undermined any type of future success. Sure, they might get a gig here and a gig there. But it won't be anything that will significantly cut into someone who's legit.
At times it does tick me off because I've done it the right way. But I remind myself by cutting corners they have already sunk their business.