Competition Law and Connected Factory Platform Dominance

1. Introduction

A connected factory platform is a digital industrial platform that connects machines, sensors, industrial robots, production-management systems, suppliers, workers, logistics providers and customers through technologies such as Industrial Internet of Things (IIoT), cloud computing, artificial intelligence, edge computing, industrial data analytics and Manufacturing Execution Systems (MES).

Examples include platforms that:

• control or coordinate industrial machinery;
• provide cloud-based factory management;
• aggregate machine-generated data;
• supply industrial operating systems;
• provide predictive-maintenance software;
• connect manufacturers with component suppliers;
• manage industrial IoT devices;
• provide industrial APIs and interoperability services; and
• combine software, hardware, cloud and data services.

Competition concerns arise when a platform becomes sufficiently important that manufacturers cannot realistically operate or switch without access to it. Dominance may then be exercised through refusal of interoperability, tying, self-preferencing, discriminatory access, exclusive dealing, excessive data extraction, discriminatory algorithms or leveraging dominance from one industrial market into another.

2. Competition-Law Framework

Connected-factory platform dominance can generally be analysed through five stages:

A. Define the relevant market

The relevant market may concern:

1. industrial IoT platforms;
2. connected-factory operating systems;
3. MES software;
4. industrial cloud services;
5. machine-data analytics;
6. predictive-maintenance platforms;
7. industrial automation software;
8. industrial equipment-management platforms; or
9. an integrated ecosystem of hardware, software and data services.

Market definition must consider substitutability, switching costs, interoperability and whether manufacturers can realistically migrate to alternative platforms.

3. Sources of Market Power

A connected-factory platform may acquire market power through:

3.1 Network effects

The platform becomes more valuable as more factories, machines and suppliers join.

3.2 Data advantages

A dominant platform may obtain enormous quantities of:

• machine-performance data;
• production data;
• maintenance data;
• supply-chain information;
• energy-consumption data; and
• customer information.

This can create a significant competitive advantage.

3.3 Switching costs

Factories may spend substantial amounts integrating a platform with:

• PLCs;
• robots;
• sensors;
• ERP systems;
• MES;
• cloud infrastructure; and
• enterprise databases.

Consequently, changing platforms may be technically and financially difficult.

3.4 Technical lock-in

Proprietary APIs, protocols, software interfaces and machine-control systems can make competing platforms incompatible.

3.5 Ecosystem effects

A platform can operate simultaneously as:

operating-system provider + cloud provider + data intermediary + software supplier + marketplace.

This creates opportunities for leveraging dominance across connected markets.

4. Major Competition Concerns

4.1 Refusal of Interoperability

A dominant platform may refuse to provide competitors with access to:

• APIs;
• technical interfaces;
• machine protocols;
• authentication systems;
• data interfaces; or
• interoperability documentation.

Where interoperability is essential for competing, such conduct may raise essential-facility/refusal-to-deal concerns.

The legal difficulty is that competition law generally does not require every dominant firm to assist competitors. The circumstances making access indispensable and the effect of the refusal therefore become critical.

5. Data Access and Data Advantage

A connected factory produces vast amounts of commercially valuable information.

A dominant platform may have access to data unavailable to competing platforms.

For example:

Manufacturer A → machines → sensors → dominant platform → cloud → analytics.

If the platform uses the resulting information to compete against Manufacturer A or its software competitors, concerns may arise concerning:

• discriminatory data access;
• exploitation of non-public information;
• exclusion of rival analytics providers;
• leveraging;
• self-preferencing; and
• unfair trading conditions.

6. Tying and Bundling

A dominant industrial platform might require customers purchasing its factory-management software also to purchase:

• cloud storage;
• cybersecurity services;
• analytics;
• maintenance software;
• payment services; or
• proprietary hardware.

The conduct becomes particularly problematic when customers cannot reasonably purchase the products separately.

For example:

Dominant MES platform + mandatory proprietary cloud + mandatory analytics module.

This could foreclose competing cloud or analytics providers.

7. Self-Preferencing

A platform operating both as infrastructure and competitor may give preferential treatment to its own products.

For example, a platform could:

• rank its own industrial analytics first;
• provide competitors with inferior API access;
• give its own predictive-maintenance service faster data access;
• prioritize its own machine components; or
• use platform-generated data to improve its competing product.

This creates a structural platform-versus-participant conflict.

8. Exclusive Dealing

A dominant platform may require factories to agree that they will:

• use only its industrial cloud;
• purchase all analytics from the platform;
• use only compatible machines;
• avoid competing platforms; or
• provide exclusive access to industrial data.

Exclusive arrangements are not automatically unlawful. Their legality depends upon factors such as duration, coverage, market power, foreclosure effects and possible efficiencies.

9. Discriminatory Access

A dominant platform may offer different technical conditions to different users.

For example:

10. Excessive Switching Costs

Connected factories frequently integrate platforms deeply into production.

A customer may have to replace:

• software;
• sensors;
• gateways;
• cloud architecture;
• APIs;
• training;
• machine configurations; and
• historical databases

to switch platforms.

A dominant platform can therefore potentially exploit technical and contractual switching costs to preserve market power.

11. Algorithmic Discrimination

Connected-factory platforms increasingly use algorithms to allocate:

• machine capacity;
• production orders;
• maintenance slots;
• suppliers;
• logistics;
• energy;
• cloud resources; and
• procurement opportunities.

If a dominant platform systematically favours its affiliated businesses, competition authorities may investigate whether the algorithm constitutes a mechanism for exclusionary conduct.

12. Competition Law and Industrial Data

Industrial data creates a distinctive competition problem.

Suppose a platform simultaneously serves 500 factories and obtains their production information. It could theoretically use aggregated information to:

1. identify profitable production segments;
2. identify customers' dependence on particular suppliers;
3. determine competitors' capacity;
4. optimise its own products; and
5. compete against firms whose data it controls.

The competitive significance depends upon what data are collected, who can access them, how they are used and whether rivals can obtain comparable information.

13. Six Important Case Laws

Case 1: Microsoft Corp. v. Commission

European Commission / General Court, Microsoft

The Microsoft litigation is highly relevant to connected-factory platforms because it addressed refusal to provide interoperability information to competing software providers.

The case demonstrated that interoperability can become a competition issue where a dominant firm controls an important technical interface and competitors require access to compete effectively.

Relevance to connected factories

A dominant industrial platform controlling:

• machine APIs;
• communication protocols;
• authentication;
• interoperability specifications; or
• software interfaces

could present a similar competition-law question.

Principle: Control over interoperability infrastructure can become an important source of exclusionary market power.

Case 2: Google Search (Shopping)

Google Search (Shopping), European Commission / General Court

The Google Shopping litigation concerned Google's treatment of its own comparison-shopping service in its search-results ecosystem.

Although the market was digital search rather than industrial automation, the case is important for self-preferencing by vertically integrated platforms.

Application to connected factories

Suppose a dominant industrial platform operates:

industrial platform → third-party applications → own industrial analytics service.

If the platform systematically privileges its own analytics service, the Google Shopping reasoning provides an important analytical reference.

Principle: A vertically integrated platform may create competition concerns when its control over an important platform is used to advantage its own competing service.

Case 3: Google Android

Google Android, European Commission

The Android case involved Google's conduct concerning mobile operating systems, applications and related services.

The case is relevant to connected factories because it illustrates how dominance in a platform layer can potentially be leveraged into adjacent markets through contractual or technical restrictions.

Connected-factory analogy

An industrial operating system could potentially be used to require:

• proprietary cloud services;
• proprietary applications;
• proprietary search/analytics;
• exclusive distribution; or
• other complementary services.

Principle: Dominance at one platform level may have competitive effects in neighbouring markets when contractual or technical restrictions limit competing services.

Case 4: Intel

Intel v. European Commission

The Intel litigation concerned rebates and exclusionary conduct involving a dominant supplier.

The case is important for connected factories because industrial platforms may employ:

• loyalty discounts;
• conditional rebates;
• exclusive purchasing arrangements; or
• incentives tied to restricting rival platforms.

Application

Suppose an industrial platform offers manufacturers substantial discounts on the condition that they do not use a competing factory-management platform.

The legality would depend upon the precise structure and competitive effects of the arrangement.

Principle: Loyalty-inducing commercial arrangements by dominant firms require careful assessment of their exclusionary effects.

Case 5: Qualcomm

Qualcomm Inc. v. European Commission

The Qualcomm litigation concerned conditional payments and exclusionary strategies in the semiconductor ecosystem.

It demonstrates the importance of analysing whether commercial incentives supplied by a powerful technology firm can restrict rivals' access to customers.

Connected-factory relevance

An industrial platform could potentially provide:

• rebates;
• preferential cloud pricing;
• integration subsidies;
• hardware discounts

conditional upon exclusive use of its ecosystem.

Principle: Conditional commercial incentives may become competition concerns when they are capable of foreclosing competing suppliers.

Case 6: United Brands v. Commission

United Brands v. Commission, Case 27/76

United Brands is a foundational EU competition case concerning abuse of a dominant position.

The Court examined market power, dominance and abusive conduct, including discriminatory treatment and other restrictions imposed by a dominant undertaking.

Connected-factory relevance

Its broader significance is that competition law distinguishes:

having a dominant position

from

abusing that dominant position.

Therefore, merely operating the largest connected-factory platform does not itself establish an infringement.

The conduct exercised through that position must be separately examined.

14. Additional Relevant Case Laws

7. Bronner v Mediaprint

Oscar Bronner GmbH v Mediaprint

Bronner is particularly relevant to refusal-to-deal and essential-facility analysis.

The Court applied a demanding test concerning when access to an infrastructure controlled by another undertaking can be required.

Connected-factory significance

A dominant platform's refusal to provide access to:

• industrial APIs;
• machine interfaces;
• network infrastructure; or
• essential platform functionality

would require careful analysis of indispensability and whether duplication is realistically possible.

8. Commercial Solvents

Commercial Solvents Corp. v Commission

The case is an important authority concerning refusal to supply and the use of dominance in an upstream market to restrict competition downstream.

Connected-factory application

Consider:

Industrial operating system → downstream industrial software market.

If the dominant platform restricts supply or access to a critical upstream input to disadvantage downstream competitors, the Commercial Solvents principle becomes relevant.

9. Slovak Telekom

Slovak Telekom v European Commission

The case concerned access and exclusionary conduct involving telecommunications infrastructure.

Its significance extends beyond telecommunications because it demonstrates how competition law may analyse access conditions imposed by infrastructure owners.

Connected-factory application

Similar issues may arise where a connected-factory platform controls an infrastructure layer necessary for rival services.

10. Amazon Marketplace

European Commission proceedings concerning Amazon's marketplace practices are relevant to the broader issue of a platform acting simultaneously as:

infrastructure provider + marketplace operator + competitor.

Connected-factory relevance

The same structural problem can arise where an industrial platform hosts independent suppliers while simultaneously offering its own competing:

• machinery;
• software;
• maintenance;
• analytics; or
• procurement services.

The central concern is whether the platform uses competitively sensitive information or platform control to advantage its own operations.

15. China Competition-Law Perspective

For China, the principal statutory framework is the Anti-Monopoly Law (AML), together with rules concerning abuse of market dominance and platform-economy conduct.

Connected-factory platforms can potentially raise issues under:

• abuse of dominant market position;
• refusal to deal;
• discriminatory treatment;
• tying or unreasonable bundled sales;
• exclusive arrangements;
• unreasonable transaction conditions;
• restrictions on transactions with counterparties; and
• other exclusionary or exploitative conduct.

China's platform-economy enforcement experience is particularly relevant because industrial platforms increasingly combine data, software, cloud infrastructure and network effects.

16. Alibaba Case

Alibaba Group — “Choose One from Two”

The Chinese competition authorities found that Alibaba had engaged in conduct requiring merchants to choose between Alibaba's platform and competing platforms.

Although Alibaba was an e-commerce platform rather than a connected-factory platform, the case is relevant to platform-based exclusivity.

Connected-factory analogy

An industrial platform could theoretically tell manufacturers:

“If you use our factory-management ecosystem, you cannot simultaneously use a competing industrial platform.”

The relevant competition question would concern market power, contractual conditions, foreclosure and effects on competition.

Lesson: Platform dominance can make contractual exclusivity substantially more significant from a competition perspective.

17. Meituan Case

Meituan — Exclusive Arrangement / Platform Conduct

The Meituan enforcement action concerned platform exclusivity and related competitive restrictions.

Its relevance to connected factories lies in the relationship between:

• platform control;
• merchant dependence;
• network effects; and
• restrictions preventing users from working with competing platforms.

Connected-factory analogy

A factory heavily dependent upon one industrial platform may be commercially comparable, in the relevant respect, to a business dependent upon a dominant digital platform.

The important issue is whether the platform uses that dependence to prevent multi-homing or access to competing systems.

18. Tencent / Digital-Platform Competition

Chinese enforcement and judicial developments involving large digital platforms also demonstrate the importance of:

• data;
• platform ecosystems;
• interoperability;
• network effects;
• user dependence; and
• platform governance.

These principles can become increasingly relevant as industrial platforms move from simple software products toward multi-sided industrial ecosystems.

19. Essential-Facility Analysis

One of the most difficult questions is:

When must a dominant connected-factory platform provide access to competitors?

A useful analytical framework is:

Step 1 — Is the platform dominant?

Market share alone is insufficient. Consider:

• network effects;
• entry barriers;
• data advantages;
• switching costs;
• customer dependence;
• technological advantages.

Step 2 — Is access genuinely indispensable?

Can competitors realistically replicate the platform or develop alternative interfaces?

Step 3 — Would refusal eliminate effective competition?

The inquiry concerns actual or likely competitive foreclosure.

Step 4 — Is there an objective justification?

Possible justifications may include:

• cybersecurity;
• intellectual property;
• safety;
• privacy;
• system integrity;
• technical capacity.

Step 5 — Can access be supplied through proportionate remedies?

Possible remedies include:

• API access;
• data portability;
• interoperability standards;
• licensing;
• non-discriminatory access;
• transparent technical conditions.

20. Interoperability as a Competition Remedy

Competition authorities may consider remedies such as:

A. API access

Competitors receive necessary technical interfaces.

B. Data portability

Factories can transfer historical operational data to another platform.

C. Open technical standards

The platform cannot unnecessarily restrict compatibility.

D. Non-discrimination

The platform must provide comparable technical access to affiliated and independent businesses.

E. Separation of platform and competing operations

In particularly serious circumstances, structural or functional separation may be considered.

21. Data Portability and Switching

Data portability is particularly important in connected factories.

A manufacturer should potentially be able to migrate:

• machine histories;
• maintenance records;
• production data;
• sensor data;
• configurations;
• operational logs; and
• analytics histories.

Without portability, a platform can make switching prohibitively expensive even without an express exclusivity clause.

22. Cybersecurity and Competition Law

An important complication is that interoperability can create cybersecurity risks.

A dominant platform may argue:

“We cannot provide unrestricted API access because it creates security vulnerabilities.”

That justification cannot simply be assumed to be either valid or invalid.

Competition analysis should examine whether:

1. the security concern is genuine;
2. less restrictive technical measures exist;
3. access can be provided securely;
4. the restriction applies equally to affiliated and independent firms; and
5. the restriction is proportionate.

23. Competition Effects

Connected-factory dominance can affect several groups.

24. Efficiency Defences

Not every restrictive practice is anti-competitive.

A platform may legitimately integrate services because integration can produce:

• cybersecurity improvements;
• lower latency;
• better machine performance;
• improved predictive maintenance;
• lower transaction costs;
• reduced downtime;
• greater reliability; and
• safety improvements.

The competition question is therefore whether the restriction is reasonably connected to legitimate efficiencies and whether less restrictive alternatives exist.

25. Hypothetical Example

Assume FactoryCloud operates the largest industrial IoT platform.

It connects:

• 10,000 factories;
• 500,000 machines;
• machine manufacturers;
• maintenance companies; and
• industrial software developers.

FactoryCloud then:

1. refuses API access to competing analytics companies;
2. requires factories to use its cloud service;
3. uses customer machine data to develop its own competing maintenance service;
4. gives its own applications preferential placement; and
5. imposes high data-export charges on customers attempting to migrate.

The competition issues would potentially include:

Issue 1 — Dominance

Does FactoryCloud possess substantial market power?

Issue 2 — Refusal to deal

Is API access indispensable?

Issue 3 — Tying

Is cloud use improperly tied to the platform?

Issue 4 — Self-preferencing

Does the platform advantage its own maintenance service?

Issue 5 — Data leveraging

Is platform-generated data being used to disadvantage rivals?

Issue 6 — Switching costs

Do technical barriers prevent effective customer migration?

Issue 7 — Discrimination

Are rival applications receiving inferior access?

26. Compliance Measures for Connected-Factory Platforms

A dominant industrial platform should consider implementing:

1. objective API-access criteria;
2. transparent technical standards;
3. non-discriminatory interoperability;
4. data-access governance;
5. clear data ownership and usage rules;
6. independent competition-law review of exclusivity;
7. prohibition on improper self-preferencing;
8. documented technical justifications for restrictions;
9. portability mechanisms;
10. competition-law training for product managers;
11. monitoring of algorithmic ranking systems; and
12. legal review before imposing ecosystem-wide contractual restrictions.

27. Key Legal Tests

28. Conclusion

Connected-factory platform dominance represents a convergence of traditional monopolisation principles and modern digital-platform competition law. The central competitive issue is not simply the size of an industrial platform, but the manner in which control over data, interoperability, APIs, cloud infrastructure, industrial software and network effects is exercised.

The most important legal precedents include Microsoft, Google Shopping, Google Android, Intel, Qualcomm, United Brands, Bronner, Commercial Solvents, Slovak Telekom, Alibaba and Meituan. Collectively, they provide analytical tools for examining:

• interoperability;
• refusal to deal;
• essential infrastructure;
• exclusivity;
• tying;
• self-preferencing;
• discriminatory access;
• data advantages; and
• leveraging of dominance into adjacent markets.

For connected factories, the critical competition-law principle is therefore:

Control over the digital infrastructure on which industrial participants depend can become a source of market power, but liability depends on the specific conduct, market structure, foreclosure effects, indispensability, and any objective or efficiency-based justification.