"Local multiplayer on Steam" has no referent, because Steam does not do local multiplayer at all. It's all up to the game. I've played plenty of games that way, Steam and the Steam Deck add no particular problem with it.
While I wouldn't pin this on Steam qua Steam as a program, it is a fair complaint about the ecosystem. I have some games that are as flexible as the Switch about being docked. I have some games that can be docked but can't handle any resolution changes. I have some games you just plain can't switch. I have some games that you can switch from using the physical Steam Deck controls to an Xbox controller seamlessly, complete with the in-game hint graphics changing to match the controller in use. I have some games that have to be restarted to pick up a new controller. At least a few months ago I had one particular combination of games that if I played them in sequence would somehow permanently render XBox controllers non-functional until I rebooted the Steam Deck, though that is certainly an exception.
The Switch does handle the Switch-ing in the Switch name better than the Steam Deck, and it is a structural advantage that Valve will have a hard time addressing in a practical way. That said, my family does use the Steam Deck as a de facto Switch 1.5, as a thing that is used fairly evenly between "docked" and "in hand", and it is functional enough to work, even if it is undeniably not as slick.