There was a court case about it, and then they lost the case, and then Bush took over the White House and the DOJ just completely dropped the whole case, so MS was never punished nor made to unbundle IE.
IE is still bundled in Windows to this day.
If this hadn't been the case, we'd be farther along now.
I don't see how, for example, Explorer being free held anyone back.
Do I need to spell this out any more for you?
Besides, many other browsers are available on Windows. ActiveX failed in the marketplace.
And no, at the time, many other browsers were not available on Windows, as they had a tiny market share, largely due to how incompatible they were with sites.
ActiveX failed eventually because of the rise of Javascript, and also because ActiveX was a giant security nightmare.
Bundling Internet Explorer into Windows was only disallowed because Windows was a monopoly.