Regulatory infringements are extremely common in low-income countries, especially with respect to retail pharmaceutical sales. There have been few practical suggestions on public policy responses other than stricter regulatory enforcement, which governments are often unable, or unwilling, to do. This paper explores the challenges of regulating retail drug sellers, and potential solutions, through a case study of malaria treatment in rural Tanzania where small drug shops are a common source of medicine. Infringement of health-related regulation was extremely common. Most stores lacked valid permits, and illegal stocking of prescription-only medicines and unpackaged tablets was the norm. Most stocked unregistered drugs, and no serving staff met the qualification requirements. Infringements are likely to have reflected infrequent regulatory inspections, a failure of regulatory authorities to implement sanctions, successful concealment of regulatory violations, and the tacit permission of local regulatory staff. Eliminating regulatory infringements is unlikely to be feasible, and could be undesirable if access to essential medicines is reduced. Alternatives include bringing official drug regulation closer into line with locally legitimate practices; greater use of positive incentives for providers; and consumer involvement. Such a change in approach has the potential to provide a firmer platform for public-private collaboration to improve shop-based treatment.