1. Introduction

Industrial By-Product Exchange Dominance concerns a situation where an undertaking, platform, intermediary, processor, marketplace, or network becomes sufficiently powerful in the market for exchanging, purchasing, selling, collecting, processing, or redistributing industrial by-products and uses that position to restrict competition.

Industrial by-products may include:

• steel slag and mill scale;
• fly ash and bottom ash;
• gypsum;
• petroleum coke;
• chemical residues;
• recovered solvents;
• waste heat;
• scrap and recyclable industrial materials;
• agricultural-industrial residues;
• recovered construction materials; and
• other secondary raw materials.

The competition issue becomes particularly significant where the exchange is effectively a gateway market. If most suppliers of a by-product and most downstream purchasers depend upon one exchange or intermediary, control over access to that exchange may allow the dominant undertaking to influence prices, quantities, customers, transaction conditions, or access to competing processors.

Under China's Anti-Monopoly Law, dominance is assessed by considering factors including market share, control over sales or purchasing markets, financial and technical strength, dependence of trading partners, and barriers to entry. Article 17 prohibits, among other things, unjustified refusal to deal, exclusive transactions, tying/unreasonable conditions, and discriminatory treatment.

2. Relevant Market

The first question is whether the relevant market is:

A. The market for the by-product itself

For example:

Market for fly ash supplied to cement manufacturers.

B. The market for exchange/intermediation services

For example:

Market for digital or physical exchange services connecting industrial by-product sellers and purchasers.

C. The market for collection and processing

For example:

Market for collection, sorting and processing of steel-industry residues.

D. A vertically connected market

There may be:

Industrial producer → exchange/platform → processor → downstream purchaser

A dominant exchange may therefore have the ability to affect competition in an adjacent processing or downstream market.

Market definition is particularly important because a seemingly small exchange may become dominant if the product is highly specialised and there are few substitutes.

3. What Creates Dominance?

An industrial by-product exchange may acquire dominance through several characteristics.

3.1 High market share

A platform handling 60–80% of transactions involving a specialised by-product may possess substantial market power.

However, market share alone is not conclusive.

3.2 Network effects

The exchange becomes more valuable as more:

• industrial producers join;
• buyers participate;
• logistics providers connect;
• processors participate; and
• price information accumulates.

This can create a self-reinforcing network effect.

3.3 Switching costs

Participants may face costs in moving to another exchange because of:

• contractual arrangements;
• software integration;
• logistics connections;
• historical transaction data;
• quality-certification systems;
• customer relationships; and
• established payment mechanisms.

3.4 Limited alternative outlets

Dominance becomes more plausible when producers cannot economically dispose of or sell their by-products through alternative channels.

3.5 Regulatory barriers

Environmental permits, transportation requirements, waste classification rules and product certification may make entry difficult.

Importantly, EU case law recognises that a material can be commercially valuable and still raise regulatory questions concerning whether it is legally classified as waste or a by-product. The CJEU has emphasised that certain by-products fall outside the waste regime where their further use is certain, direct use is possible without processing beyond normal industrial practice, they arise integrally from production, and their use is lawful.

4. Forms of Abuse

4.1 Refusal to Deal

A dominant exchange may refuse access to:

• suppliers;
• purchasers;
• competing processors;
• logistics providers; or
• competing exchanges.

Example:

An exchange controlling 75% of industrial gypsum transactions refuses to list an independent gypsum processor without objective justification.

This can potentially constitute an exclusionary abuse where access is indispensable and the refusal eliminates effective competition.

5. Essential Facility Dimension

An industrial by-product exchange can sometimes resemble an essential facility.

The analysis generally asks:

1. Is the facility controlled by a dominant undertaking?
2. Is access indispensable?
3. Is duplication practically or economically impossible?
4. Is access being refused?
5. Would refusal eliminate effective competition?
6. Is there an objective justification?

The doctrine is not automatically triggered merely because access would be commercially convenient.

6. Exclusive Dealing

A dominant exchange could require:

"All industrial by-products generated by participating manufacturers must be sold exclusively through our exchange."

Such a provision can foreclose rival exchanges.

The assessment should consider:

• duration;
• market coverage;
• percentage of supply tied up;
• availability of alternatives;
• switching costs;
• entry barriers; and
• actual foreclosure effects.

7. Discriminatory Access

Suppose the exchange gives preferred participants:

• faster listings;
• better search rankings;
• lower commissions;
• access to transaction data;
• priority logistics;
• preferential credit terms.

If comparable trading partners receive materially different terms without objective justification, discrimination concerns can arise.

China's AML expressly identifies differential prices and other transaction terms between equivalent trading counterparts as a potential form of abuse where there is no justifiable reason.

8. Excessive Purchasing Power

The problem may occur on the buying side rather than the selling side.

Suppose one exchange represents almost all purchasers of a particular industrial residue.

It could exploit suppliers by:

• imposing unfairly low purchase prices;
• imposing excessive commissions;
• delaying payments;
• requiring unreasonable quality deductions; or
• forcing suppliers to accept additional services.

This raises the possibility of buyer-side dominance.

The Chinese AML specifically recognises the ability to control the purchasing market for raw and semi-finished materials as relevant to dominance.

9. Tying and Bundling

A dominant exchange might require:

"To access our industrial slag exchange, you must also purchase our logistics and processing services."

This can create foreclosure in neighbouring markets.

Competition authorities would examine whether:

• the products are separate;
• the undertaking is dominant in the tying market;
• customers are compelled to take the tied product;
• competitors are foreclosed; and
• there is an objective justification.

10. Data Advantage

A modern industrial by-product exchange may possess extensive information about:

• quantities available;
• reserve capacity;
• purchase prices;
• supplier identities;
• customer demand;
• transportation costs;
• quality specifications; and
• transaction histories.

If the exchange itself competes with participants, this creates an important vertical conflict of interest.

For example:

The exchange obtains confidential supplier bids and then uses that information to undercut those suppliers through its own trading arm.

This may produce both dominance and information-exchange concerns.

The European Commission has recognised that information exchanges concerning prices, quantities, market allocation or other competitive parameters can constitute cartel conduct where they coordinate competitors' behaviour.

11. Self-Preferencing

A vertically integrated exchange could favour its own processing subsidiary.

For example:

Independent producer → exchange → competing processors

could be transformed into:

Independent producer → exchange → exchange-owned processor

through:

• preferential ranking;
• lower transaction fees;
• preferential access to supply;
• discriminatory technical access;
• preferential quality certification; or
• withholding information from rivals.

The principal competition question is whether the exchange is using its upstream intermediary position to disadvantage downstream competitors.

12. Loyalty Rebates

The exchange might offer:

"Users conducting more than 80% of their by-product transactions through our platform receive a 40% commission rebate."

Such rebates can be legitimate discounts, but they may raise foreclosure concerns where their structure effectively rewards customers for excluding rival exchanges.

Relevant factors include:

• duration;
• retroactive versus incremental rebate;
• share of demand covered;
• switching costs;
• competitor viability; and
• likely foreclosure effects.

13. Predatory Pricing

A dominant exchange might temporarily charge:

zero commission or below-cost transaction fees

to eliminate competing exchanges.

The legal inquiry would examine:

• appropriate cost benchmark;
• duration;
• financial sacrifice;
• recoupment where legally relevant;
• market foreclosure; and
• legitimate promotional explanations.

14. Unfairly Low Purchase Prices

A dominant industrial by-product purchaser may possess substantial buyer power and offer suppliers prices below competitive levels.

This is particularly important for materials that producers cannot easily store.

For example:

A steel mill generates large quantities of slag that must be removed regularly. A dominant exchange knows that the mill has no practical alternative and systematically reduces the purchase price.

This can create exploitative monopsony/monopsony-like concerns.

15. Case Law

Because disputes specifically involving an "industrial by-product exchange" are relatively rare, the most useful authorities come from essential facilities, refusal to deal, discriminatory access, platform dominance, vertical foreclosure and waste/by-product markets.

Case 1 — Commercial Solvents Corp. v Commission

The EU Court's decision in Commercial Solvents Corp. v Commission, Joined Cases 6/73 and 7/73 is a foundational refusal-to-supply case.

A vertically integrated undertaking controlled an important upstream input and sought to restrict supply to an existing downstream customer with which it competed.

Principle

A dominant undertaking cannot use control over an upstream input to eliminate competition in a downstream market without justification.

Application

An industrial by-product exchange could face similar concerns where:

Exchange → processing input → downstream market

and the exchange uses its control over the input to disadvantage independent processors.

Case 2 — United Brands v Commission

United Brands v Commission, Case 27/76 established important principles concerning dominance and market power.

The Court examined the undertaking's ability to behave independently of competitors, customers and consumers.

Relevance

For an industrial by-product exchange, the assessment should not stop at transaction volume.

The authority should examine:

• customer dependence;
• alternative exchanges;
• entry barriers;
• buyer power;
• transportation constraints; and
• switching possibilities.

Case 3 — Magill

In RTE and ITP v Commission, Joined Cases C-241/91 P and C-242/91 P, commonly known as Magill, the Court considered refusal to license information necessary for a downstream product.

The case established restrictive conditions surrounding exceptional circumstances in which refusal to provide access to an indispensable input may constitute abuse.

Application

Consider an industrial exchange possessing the only commercially indispensable:

• certification database;
• product-quality database;
• transaction interface;
• inventory information; or
• access mechanism.

If a rival cannot realistically compete without access, Magill-type reasoning becomes relevant.

Case 4 — Bronner v Mediaprint

In Oscar Bronner GmbH & Co. KG v Mediaprint, Case C-7/97, the CJEU set a demanding standard for compulsory access to infrastructure.

The Court emphasised factors such as:

• indispensability;
• absence of a realistic alternative;
• elimination of effective competition; and
• lack of objective justification.

Application

This is highly relevant to an industrial by-product exchange.

A claimant would need to demonstrate more than:

"The dominant exchange is cheaper or more efficient."

The stronger argument would be:

"Without access to this exchange, effective participation in the relevant market is practically impossible."

Case 5 — IMS Health

In IMS Health GmbH & Co. OHG v NDC Health GmbH, Case C-418/01, the CJEU further developed the exceptional circumstances surrounding refusal to license an indispensable resource.

Relevance

Suppose a dominant exchange owns a proprietary:

• industrial-material classification system;
• technical database;
• digital exchange protocol; or
• industry-wide transaction architecture.

If the system has become indispensable for competition and refusal prevents the emergence of a competing service, IMS Health provides an important analytical framework.

Case 6 — Slovak Telekom

In Slovak Telekom v Commission, Joined Cases C-165/19 P and C-167/19 P, the CJEU considered exclusionary conduct involving access to infrastructure controlled by a dominant undertaking.

The case is particularly useful because it demonstrates that where competition law addresses access to infrastructure, the precise legal analysis depends upon the nature of the conduct and the applicable regulatory framework.

Application

For an industrial exchange:

dominant exchange + controlled access + downstream competitors

may create a foreclosure theory where access restrictions disadvantage competing processors, distributors or exchanges.

Case 7 — Google Shopping

In Google and Alphabet v Commission, concerning the Google Shopping case, the EU courts examined Google's treatment of competing comparison-shopping services within its dominant general-search ecosystem.

Relevance

The broader competition principle concerns the use of a dominant gateway to favour one's own downstream service.

An industrial by-product exchange could present an analogous situation:

Exchange platform

↓

Own processing/trading subsidiary

↓

Preferential placement/access

while competing processors receive inferior treatment.

The factual and legal circumstances are different, but the self-preferencing/leveraging analysis is potentially instructive.

Case 8 — Aspen Skiing

In Aspen Skiing Co. v Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), the U.S. Supreme Court considered a refusal to continue a previously profitable cooperative arrangement.

Principle

Under particular circumstances, termination of an established course of dealing can contribute to an exclusionary-conduct finding.

Application

For an industrial exchange, evidence that a dominant intermediary:

1. historically allowed independent processors to participate;
2. benefited from the arrangement;
3. suddenly terminated access;
4. lacked a legitimate commercial explanation; and
5. did so in a manner that harmed competition

could be relevant.

The U.S. standard is not identical to the EU or Chinese approach, so the case should be used comparatively rather than mechanically.

16. Indian Case Law — Particularly Relevant Analogies

Case 9 — Transparent Energy Systems Pvt. Ltd. v Tecpro Systems Ltd.

In Transparent Energy Systems Pvt. Ltd. v Tecpro Systems Ltd., the CCI examined allegations concerning the market for setting up waste-heat-recovery power plants for cement industries.

The dispute concerned a company entering the market through collaboration and allegations of low-price competitive conduct and abuse of dominance. The CCI considered the relevant product and geographic markets under the Competition Act.

Relevance

This illustrates the importance of precisely defining a specialised industrial market.

For an industrial by-product exchange, the relevant market might similarly need to be narrowly examined rather than simply defined as the entire "waste management" sector.

Case 10 — Delhi Jal Board v Grasim Industries Ltd.

In Delhi Jal Board v Grasim Industries Ltd. & Others, the CCI considered allegations involving industrial chemical markets and the competitive relationship between producers and purchasers.

Relevance

The case illustrates how competition analysis can involve:

• industrial inputs;
• purchasing relationships;
• market power;
• coordinated conduct; and
• dependence between industrial undertakings.

This is relevant where an industrial by-product exchange creates substantial buyer-side market power.

17. By-Product Classification and Competition Analysis

A particularly important issue is whether the material is:

Waste

or

A commercially valuable by-product.

This distinction can affect:

• regulatory obligations;
• market definition;
• entry conditions;
• transportation;
• licensing;
• environmental compliance; and
• competitive alternatives.

The CJEU has recognised that a substance resulting from production may qualify as a by-product where its subsequent use is certain, it can be used directly without processing beyond normal industrial practice, it is an integral part of the production process, and the use is lawful.

Therefore, an exchange dealing in commercially valuable industrial by-products may constitute a secondary-material market, rather than merely a waste-disposal market.

18. Environmental Regulation and Competition

Environmental regulation can complicate dominance analysis.

Suppose only one exchange possesses the permits required to handle a particular industrial residue.

The exchange might argue:

"Our exclusivity results from environmental regulation."

The competition authority would need to distinguish between:

legitimate regulatory requirements

and

private conduct that goes beyond what regulation requires.

This is particularly important because environmental objectives may justify certain restrictions, but they do not automatically immunise every commercial practice of a dominant undertaking.

19. Network Effects and Tipping

Industrial exchanges can exhibit platform tipping.

A typical sequence is:

More buyers

↓

More suppliers join

↓

More transactions

↓

Better liquidity

↓

More price information

↓

More buyers and suppliers join

↓

Rivals lose liquidity

Eventually, one exchange may become the dominant transaction gateway.

The resulting dominance does not itself establish an infringement. The critical issue is whether the undertaking subsequently abuses that position.

20. Information Asymmetry

The exchange may possess significantly more information than individual participants.

For example, it may know:

• every seller's minimum acceptable price;
• every buyer's maximum willingness to pay;
• available inventories;
• future production;
• transportation constraints; and
• competing offers.

If the exchange competes downstream, this creates a potential conflict.

A dominant exchange could use confidential information obtained through its intermediary role to disadvantage independent participants.

21. Hub-and-Spoke Risk

An exchange can also become the hub through which competitors interact.

For example:

Producer A

↘

Industrial Exchange

↗

Producer B

If competing producers receive competitively sensitive information through the same exchange, there may be risks involving:

• price coordination;
• output coordination;
• customer allocation;
• market sharing; or
• monitoring of competitors.

The European Commission has expressly recognised that information exchanges can constitute cartel conduct where they facilitate coordination concerning prices, quantities, customers, markets or other competitive parameters.

22. Efficiency Defences

Not every exclusive arrangement is unlawful.

An exchange might legitimately require certain conditions because they:

• reduce transportation costs;
• improve environmental compliance;
• guarantee material quality;
• prevent contamination;
• improve traceability;
• reduce transaction costs;
• increase recycling;
• improve safety; or
• create economies of scale.

Under Chinese competition law, certain agreements can receive statutory treatment where they improve technology, quality, efficiency, environmental protection or other recognised objectives, subject to the applicable conditions.

The central question is whether the restriction is necessary and proportionate to the legitimate efficiency.

23. Evidence Relevant to a Dominance Investigation

A competition authority would typically examine:

Market evidence

• market shares;
• transaction volumes;
• number of participating buyers/sellers;
• alternative exchanges;
• geographic coverage.

Contractual evidence

• exclusivity clauses;
• minimum-volume commitments;
• loyalty rebates;
• access conditions;
• termination clauses.

Technical evidence

• interoperability;
• API restrictions;
• switching costs;
• database ownership;
• platform architecture.

Economic evidence

• price-cost data;
• commissions;
• margins;
• foreclosure analysis;
• diversion ratios;
• elasticity;
• profitability.

Internal documents

Particularly important evidence may include internal communications showing an intention to:

• exclude rival exchanges;
• prevent competitors from obtaining supply;
• exploit supplier dependence;
• favour an affiliated processor; or
• use confidential exchange data against participants.

24. Possible Remedies

If abuse is established, possible remedies may include:

1. removal of unjustified exclusivity;
2. non-discriminatory access;
3. transparent membership criteria;
4. prohibition of discriminatory fees;
5. interoperability obligations;
6. data-access safeguards;
7. separation of marketplace and competing trading functions;
8. restrictions on use of confidential participant information;
9. termination of loyalty rebates;
10. behavioural commitments; and
11. in appropriate cases, structural remedies.

25. Hypothetical Example

Assume Industrial Exchange X handles 78% of China's transactions in a specialised steel by-product.

It has:

• 80% of registered industrial suppliers;
• 75% of major purchasers;
• an integrated logistics network;
• proprietary quality certification;
• historical transaction data; and
• a downstream processing subsidiary.

X then introduces a rule:

Suppliers obtaining more than 20% of their sales outside X lose access to X's premium marketplace.

At the same time, X:

• gives its own subsidiary priority access;
• charges rival processors higher fees;
• refuses API access to competing exchanges; and
• uses supplier price information to negotiate directly with those suppliers.

Potential theories

The final legal conclusion would depend upon the relevant market, objective justifications, actual foreclosure and evidence of competitive harm.

26. Key Legal Principles from the Case Law

27. Conclusion

Industrial By-Product Exchange Dominance sits at the intersection of dominance law, essential facilities, vertical foreclosure, platform economics, buyer power, environmental regulation and circular-economy markets.

The most important analytical sequence is:

Relevant market

→ Market power/dominance

→ Dependence of suppliers and buyers

→ Control over exchange infrastructure

→ Refusal/discrimination/exclusivity/self-preferencing

→ Foreclosure or exploitation

→ Objective justification

→ Competitive effects

→ Proportionate remedy