The result is grade inflation and it has been well documented:
They then attribute the rapid rise in grade inflation in the last couple of decades to a more “consumer-based approach” to education, which they say “has created both external and internal incentives for the faculty to grade more generously.” More generous grading can produce better instructor reviews, for example, and can help students be more competitive candidates for graduate schools and the job market.
Let me give you an example. I teach programming privately. People pay me $100/hr. Some of them found jobs thanks to my lessons. Some of them realized it's not for them and they didn't waste tons of money and time. And I've been doing this long enough to say there's a demand for my services and people generally like it. I don't grade them, I give them useful feedback on what should they improve and if they should continue. My primary goal is their success, not some stupid grade. Market works great if you apply it right.