While that's an interesting theory and arguably true today, I don't think it was true even 5 years ago. Prior to the release of the M&P line, S&W had very little to lose in promoting Walther products because they offered few products that directly competed with anything Walther made. Lack of promotion for the P99 made sense because S&W was successfully chasing American LE contracts with the license-built SW99 and Walther was getting a slice of the pie.
Exactly. S&W has no real incentive to properly market the P99/PPQ as they compete directly with their M&P pistols. Likewise, the PPS is a competitor to the M&P Sheild.
The P99/PPQ sells at a slightly higher price point than the M&P, but the honest fact is that they are significantly better pistols in many respects (especially trigger feel and fit & finish). It probably just looks bad for S&W.