They drove the competitor (Netscape) out of business by giving away their browser. There's no way for the market to correct for that or "a feasible competitor to emerge".
It amazes me that someone who's only 5 years younger than me and even has a CS degree is so completely out of touch with recent computer history. I understand why, everything changes so fast, but you cannot understand what MS did if you weren't there. Their callous destruction of Netscape stopped an era of rapid innovation in internet technologies, HTML & js simply stagnated for almost 6-7 years afterwards, before it had been iterating rapidly.
It is now back to iterating like it did, these last 2-3 years and the WHATWG, it really feels like things are back on track again, though some really, really important things are still taking a while (like observables, which are super important for GUI driven apps).
It's an imponderable, we'll never know the answer. You are extrapolating it out to a scenario where IE didn't exist, and Netscape, the standards organizations, and all the other key players were harmonious stewards of some sort of golden age.
I'm not saying that I support anything that Microsoft did in the '90s, rather that it is totally plausible to me that the players in the no-IE parallel universe were perfectly capable of screwing things up just as badly or worse. Since it's extrapolation, what's plausible to us says more about how we feel about the different players than anything else.
The problem was the combination of IE6 (at the time, the best browser out there) and MS business tactics simply crushed everyone else. At that point MS decided to work on other things and let IE waste.
They did a lot of other strange things as well. I know Microsoft people showed up to at least one IETF working group pretending to be interested in doing standards work, only to return later having patented key points of the standard, saying they weren't interested anymore.
So IE was just a small part of that famous strategy, even if it was a central piece. But the bundling was never much of an issue unless you were a direct competitor. The only reason that's what people remember is the court case was widely reported in media at the time.
It always saddens me to think of how many people want to see this principle enshrined in law.
But if anyone killed Netscape by giving away free software it was the Apache project since for a while selling web server software was a viable business, while OTOH there's really no historical data to support the fact that selling web browser licenses was ever going to be an economically successful strategy outside of niche markets like Opera.
And whether or not Microsoft directly killed Netscape or not, I'd argue that the web would not be nearly the ubiquitous technology it is today if web browser software typically cost money, which means that by standardizing web browser software as free Microsoft did the entire web industry (if not netscape) a great service, really.