Microsoft have to tread carefully because they cannot do anything they want with their OS anymore because of how widely used it is and the business it provides for millions of other people (e.g. all the AV vendors). Microsoft have been sued in the past for certain behaviours, they walk with more care now.Only Microsoft has the keys to the OS. They are in the best position to do something that others can't.
Microsoft do the same things as third-party AVs do from their own documented techniques anyway. They have some hidden things, but such is offered to third-party AVs through features like ELAM. It's been this way for a long time.
If Microsoft did certain things which killed off the competition, they'd have more lawsuits than employees by the AM of the next morning. And they'd lose a hell of a lot of them.
Microsoft are partnered with a lot of AV vendors through several different partnership programmes anyway - they work together by sharing certain resources/intelligence. Microsoft are focused more on Enterprise security (even if their documentation sucks) and Windows Defender for home was always meant to be basic and simple.
The AV industry isn't going to die because a lot of people want fancy features they cannot get with Windows Defender alone. More often than not, the average Joe will just want a full suite to take care of everything for him/her. As for Enterprise, not many people will put up with the lack of documentation from Microsoft, and existing Enterprises will probably have more experience with other third-parties, so third-party AV vendors still keep business for the big bucks.
In the end, everyone is happy. Microsoft stay rich regardless of how Windows Defender (for Enterprises) goes and third-party AV vendors stay rich because they keep a majority of market share (including from paid customers).