Competition Law and Smart Manufacturing Competition Issues

Introduction

Smart manufacturing refers to manufacturing systems that combine industrial machinery with IoT sensors, industrial software, cloud computing, artificial intelligence, robotics, digital twins, machine-learning systems, data analytics, industrial platforms, and automated decision-making.

From a competition-law perspective, smart manufacturing creates a distinctive problem: a firm may possess market power not merely because it manufactures a physical product, but because it controls a critical digital layer—such as manufacturing-execution software (MES), SCADA systems, industrial operating systems, machine data, APIs, cloud infrastructure, or proprietary interfaces.

The principal competition concerns therefore include:

1. dominance over industrial software or platforms;
2. data monopolisation;
3. interoperability restrictions;
4. technological lock-in;
5. tying and bundling;
6. exclusionary licensing;
7. refusal to supply APIs or technical information;
8. algorithmic coordination;
9. discriminatory access to industrial data;
10. vertical foreclosure;
11. acquisitions of emerging industrial-technology competitors; and
12. restrictions on independent maintenance and aftermarket services.

The Competition Commission of India has already considered an industrial automation software dispute involving AVEVA, making the subject particularly relevant to Indian competition law. The CCI noted that MES, SCADA and historian software markets contained multiple competing suppliers, including Siemens, Rockwell, SAP, Oracle, Honeywell, Emerson and ABB.

I. Legal Framework

1. India

The principal legislation is the Competition Act, 2002, particularly:

• Section 3 – anti-competitive agreements;
• Section 4 – abuse of dominant position;
• Section 5 – combinations;
• Section 6 – regulation of combinations;
• Section 19 – inquiry into agreements and dominance;
• Sections 26 onwards – investigation and adjudication;
• Section 27 – orders following finding of contravention.

For smart manufacturing, Section 4 is particularly important where a firm controlling an essential industrial software or data layer allegedly:

• refuses access;
• imposes unfair conditions;
• ties products;
• discriminates between customers;
• prevents interoperability;
• uses dominance in one market to enter another; or
• restricts technical development.

II. Why Smart Manufacturing Creates Competition Problems

1. Control over industrial data

Smart factories continuously generate:

• machine-performance data;
• production data;
• maintenance data;
• sensor information;
• quality-control data;
• energy-consumption data;
• predictive-maintenance information;
• customer/order information.

If one software provider controls the data architecture, competitors may be unable to provide competing analytics, maintenance or optimisation services.

This can transform data access into a competitive bottleneck.

2. Interoperability

A modern factory may contain:

Robot → PLC → SCADA → MES → ERP → Cloud → AI analytics.

If one supplier deliberately makes its system difficult to connect with competing systems, the customer can become technologically dependent on that supplier.

Competition authorities may therefore examine:

• API availability;
• interface documentation;
• data-export facilities;
• machine-to-machine communication;
• compatibility standards;
• proprietary protocols;
• switching costs.

The Microsoft litigation provides an important precedent because the European Commission treated interoperability information as potentially significant to competition in neighbouring software markets.

III. Major Competition Issues

1. Dominance in Industrial Software

A smart-manufacturing supplier may become dominant in a narrow market such as:

• MES software;
• SCADA software;
• industrial historians;
• industrial IoT platforms;
• digital-twin software;
• predictive-maintenance platforms;
• factory-control software.

Market definition becomes complicated because traditional software products can increasingly perform overlapping functions.

The relevant question is not simply:

"Who manufactures the machine?"

It may instead be:

"Who controls the digital infrastructure necessary for the machine to operate, communicate and generate usable data?"

IV. Tying and Bundling

Suppose a dominant MES provider requires customers purchasing MES software also to purchase:

• its analytics platform;
• cloud storage;
• cybersecurity services;
• predictive-maintenance software; or
• industrial AI tools.

The conduct may raise competition concerns if the firm uses dominance in one market to foreclose competitors in another.

The analysis normally considers:

1. separate products;
2. dominance in the tying market;
3. coercion or contractual linkage;
4. foreclosure of competitors;
5. consumer/customer effects;
6. objective justification and efficiencies.

V. Technological Lock-In

Smart manufacturing has particularly high switching costs.

Changing an industrial platform may require:

• replacing hardware;
• rewriting software;
• retraining employees;
• migrating historical data;
• recertifying systems;
• changing cybersecurity architecture;
• modifying APIs;
• interrupting production.

Consequently, a supplier can potentially acquire substantial installed-base power.

A competition authority may therefore distinguish between:

normal customer loyalty
and
artificial technological lock-in.

VI. Refusal to Provide APIs or Data

A dominant industrial-platform provider may possess information necessary for competitors to operate compatible products.

A refusal to provide access can raise an essential-facilities/interoperability issue where the relevant legal requirements are satisfied.

The Microsoft precedent is especially relevant because the European courts considered Microsoft's refusal to disclose interoperability information needed by competing server-software suppliers.

Modern smart manufacturing can extend this principle to:

• machine APIs;
• industrial protocols;
• sensor data;
• digital-twin interfaces;
• cloud APIs;
• diagnostic interfaces.

However, not every proprietary technology constitutes an essential facility. Competition law must balance interoperability against legitimate intellectual-property and innovation incentives.

VII. Data Advantage and Competitive Foreclosure

A vertically integrated industrial-platform provider may simultaneously be:

• software supplier;
• machine manufacturer;
• cloud provider;
• data processor;
• maintenance provider.

It may obtain data from customers using its platform and subsequently use that information to compete against those customers or independent service providers.

Potential concerns include:

A. Preferential access

The platform gives its own subsidiary access to data unavailable to competitors.

B. Data discrimination

Independent service providers receive inferior or delayed access.

C. Self-preferencing

The platform displays its own analytics or maintenance services more prominently.

D. Data accumulation

The platform uses data collected from thousands of factories to improve its own products and increase barriers to entry.

These concerns resemble broader competition issues identified in modern digital markets, where firms may use data or technology to strengthen market power and disadvantage competing providers.

VIII. Algorithmic Coordination

Smart manufacturing increasingly uses algorithms to determine:

• production quantities;
• procurement;
• inventory;
• prices;
• capacity;
• logistics;
• machine utilisation.

If competing manufacturers use similar pricing or production algorithms, there is a possibility of:

• algorithmic coordination;
• information exchange;
• automated signalling;
• hub-and-spoke coordination;
• tacit coordination facilitated by technology.

Competition law therefore cannot assume that coordination requires traditional telephone calls or written agreements.

IX. Vertical Foreclosure

Consider a dominant industrial-equipment manufacturer that owns:

Machine + software + cloud + maintenance network.

It might impose restrictions preventing independent:

• repair companies;
• software developers;
• systems integrators;
• maintenance providers

from servicing machines.

This could protect an aftermarket and raise competition concerns where the relevant legal requirements for abusive conduct are met.

X. Aftermarket Competition

Smart factories generate significant aftermarket services:

• spare parts;
• software updates;
• cybersecurity;
• maintenance;
• calibration;
• technical support;
• predictive maintenance.

A manufacturer might sell the initial machine competitively but later impose restrictive conditions in the aftermarket.

Competition authorities may therefore examine whether customers were effectively locked into the supplier's ecosystem.

XI. Mergers and Acquisitions

Smart manufacturing is highly innovation-driven.

Large industrial firms may acquire:

• AI start-ups;
• robotics companies;
• industrial IoT firms;
• digital-twin developers;
• predictive-maintenance providers;
• cybersecurity companies.

Even a relatively small target may possess strategically important technology.

Therefore merger analysis can consider:

• innovation competition;
• potential competitors;
• data assets;
• interoperability;
• vertical foreclosure;
• ecosystem effects;
• future technological competition.

XII. At Least 6 Important Case Laws

1. Velusamy Karuppannan v. AVEVA Group Ltd. — CCI, 2025

This is the most directly relevant Indian precedent for smart manufacturing.

The informant alleged that AVEVA engaged in anti-competitive conduct in the industrial automation software sector, including allegations concerning:

• bundling;
• tying;
• pricing;
• exclusion of competitors; and
• abuse of market power.

The CCI examined MES, SCADA and historian software and identified several competing suppliers. It ultimately dismissed the matter under Section 26(2), finding insufficient basis for proceeding against AVEVA.

Importance

The case demonstrates that:

Participation in an important industrial software market does not automatically establish dominance.

The relevant market and actual competitive conditions must be demonstrated.

It is particularly valuable for analysing smart manufacturing because the CCI expressly considered industrial automation software.

2. Microsoft Corp. v. Commission — General Court of the EU

Microsoft concerned Microsoft's refusal to provide interoperability information necessary for competing work-group server operating systems.

The European Commission concluded that Microsoft had abused its dominant position through restrictions concerning interoperability information, and the General Court examined the issue extensively.

Smart-manufacturing relevance

The reasoning can be considered when a dominant industrial-platform provider refuses access to:

• APIs;
• protocols;
• technical interfaces;
• compatibility information.

A smart factory often depends upon interoperability among equipment supplied by different manufacturers.

3. Qualcomm (Exclusivity Payments) — European Commission, Case AT.40220

The European Commission found Qualcomm dominant in the worldwide LTE chipset market and concluded that payments to Apple conditional upon obtaining its LTE chipset requirements from Qualcomm constituted abusive conduct under Article 102 TFEU.

Smart-manufacturing relevance

The case illustrates the competition-law concern of using conditional commercial incentives to foreclose rivals.

A similar issue could arise if a dominant industrial technology provider offered substantial rebates or incentives conditional upon customers purchasing its entire:

machine + software + cloud + analytics

ecosystem.

4. Qualcomm/NXP — European Commission, Case M.8306

The Qualcomm/NXP merger involved semiconductor technologies and raised horizontal and conglomerate concerns, including issues concerning smart amplifier chips, baseband technology and intellectual-property licensing.

The Commission examined market power, barriers to entry and potential effects across connected technological markets.

Smart-manufacturing relevance

Modern factories depend heavily on:

• sensors;
• microprocessors;
• connectivity chips;
• embedded systems;
• industrial communications.

The case illustrates how competition authorities can examine technology ecosystems rather than a single isolated product.

5. United States v. United Technologies Corp. / Rockwell Collins

The U.S. Department of Justice challenged the United Technologies acquisition of Rockwell Collins.

The transaction involved both horizontal and vertical merger concerns, and the matter resulted in a final judgment in January 2019.

Smart-manufacturing relevance

Rockwell Collins operated in sophisticated aerospace component and systems markets.

The case demonstrates why vertical integration matters where one company can control multiple levels of a technologically interconnected supply chain.

For smart manufacturing, comparable concerns can arise where one transaction combines:

industrial equipment + control software + components + data + services.

6. Rockwell Automation, Inc. v. Radwell International, Inc.

This U.S. litigation involved industrial automation products, including controllers, sensors, motors, human-machine interfaces and related equipment.

The litigation also involved an antitrust counterclaim, although the dispute primarily involved trademark and unfair-competition issues.

Smart-manufacturing relevance

The case demonstrates the importance of aftermarket and distribution relationships in industrial automation.

Competition questions can arise where manufacturers restrict:

• authorised distribution;
• resale;
• independent servicing;
• access to replacement products.

7. Qihoo 360 v. Tencent

China's Supreme People's Court considered allegations that Tencent abused a dominant position in the instant-messaging market.

The Court examined:

• relevant-market definition;
• market power;
• dominance;
• alleged bundling/restrictions;
• competitive effects.

It ultimately found insufficient evidence to establish the alleged monopolistic conduct.

Smart-manufacturing relevance

The case is important because smart manufacturing increasingly combines multiple technological functions in one ecosystem.

It demonstrates the importance of carefully defining:

the relevant product market + geographic market + actual competitive constraints.

8. Ketian et al. v. Hitachi Metals — Supreme People's Court of China

This case involved allegations concerning refusal to supply and the essential-facilities doctrine.

The lower court had found an abuse of dominance, but the Supreme People's Court reversed, concluding that the relevant technology market was broader and that Hitachi Metals did not possess the necessary dominant position.

Smart-manufacturing relevance

This is highly relevant to disputes involving:

• proprietary industrial technology;
• essential components;
• technical standards;
• APIs;
• proprietary manufacturing processes.

It demonstrates that an alleged technological bottleneck must first satisfy the requirements for establishing dominance and an appropriate relevant market.

XIII. Comparative Case-Law Principles

XIV. Competition Concerns Across the Smart-Manufacturing Value Chain

A. Hardware layer

Potential issues:

• component concentration;
• exclusive supply;
• interoperability restrictions;
• discriminatory licensing.

B. Connectivity layer

Potential issues:

• proprietary protocols;
• IoT network access;
• standards control;
• exclusion of competing devices.

C. Software layer

Potential issues:

• tying;
• bundling;
• licensing restrictions;
• refusal to interoperate.

D. Data layer

Potential issues:

• data hoarding;
• discriminatory access;
• data portability restrictions;
• use of customer data against customers.

E. AI layer

Potential issues:

• access to training data;
• algorithmic discrimination;
• algorithmic coordination;
• exclusive AI partnerships.

F. Services layer

Potential issues:

• repair restrictions;
• aftermarket foreclosure;
• certification restrictions;
• restrictions on independent integrators.

XV. Competition Law and Industrial Standards

Smart factories frequently depend upon common standards.

Standards can promote competition by allowing:

• interoperability;
• multi-vendor procurement;
• easier switching;
• lower integration costs.

However, standards can also create competition problems where a dominant firm:

1. controls the standard-setting process;
2. excludes rivals;
3. manipulates technical specifications;
4. obtains control over essential IP;
5. imposes discriminatory licensing conditions.

Therefore, standardisation can be simultaneously pro-competitive and exclusionary depending on how it is implemented.

XVI. Role of Intellectual Property

Smart manufacturing involves substantial IP:

• patents;
• software copyrights;
• trade secrets;
• industrial designs;
• standards-essential patents;
• proprietary protocols.

Competition law does not generally prohibit a company from protecting legitimate IP.

The competition concern arises where IP rights are used as an instrument to exclude competition beyond the legitimate scope of the right.

The Chinese Supreme People's Court's approach in Ketian v. Hitachi Metals illustrates the importance of examining both technological rights and the actual competitive structure of the relevant market.

XVII. Remedies

Competition authorities may potentially employ several remedies.

Structural remedies

• divestiture;
• separation of business units;
• prohibition of certain acquisitions.

Behavioural remedies

• interoperability obligations;
• API access;
• non-discriminatory access;
• data portability;
• prohibition of tying;
• licensing commitments;
• restrictions on exclusivity.

Merger remedies

• access commitments;
• firewall arrangements;
• licensing obligations;
• interoperability commitments;
• divestiture of overlapping technologies.

The appropriate remedy depends upon the nature and magnitude of the competitive harm.

XVIII. Compliance Framework for Smart-Manufacturing Companies

Companies operating smart-manufacturing ecosystems should establish controls concerning:

1. Data

Maintain clear rules regarding:

• ownership;
• access;
• portability;
• permitted use;
• sharing with competitors.

2. APIs

Document legitimate reasons for:

• granting access;
• refusing access;
• charging access fees;
• modifying interfaces.

3. Bundling

Legal review should be undertaken before making one industrial product conditional upon purchasing another.

4. Exclusivity

Long-term exclusive arrangements should receive competition-law review where the supplier possesses significant market power.

5. Algorithms

Competitors should not use algorithms to exchange competitively sensitive information or coordinate prices or output.

6. M&A

Acquisitions involving industrial AI, robotics, IoT, MES, SCADA or data platforms should be screened for:

• horizontal overlaps;
• vertical foreclosure;
• innovation effects;
• ecosystem effects;
• control of strategic data.

XIX. Emerging Competition Issues

The next generation of smart manufacturing is likely to raise questions involving:

1. AI-powered factory management;
2. digital twins;
3. industrial metaverse platforms;
4. autonomous factories;
5. robot-as-a-service models;
6. industrial cloud platforms;
7. machine-data marketplaces;
8. predictive-maintenance ecosystems;
9. industrial cybersecurity platforms;
10. AI procurement algorithms.

A particularly important future issue is whether control over industrial data + AI models + machine interfaces creates a new form of infrastructure-based market power.

Conclusion

Competition law in smart manufacturing is moving beyond traditional questions of price and physical production capacity.

The central competitive question increasingly becomes:

Who controls the technological ecosystem through which manufacturing takes place?

A company may possess substantial competitive significance through control of:

machines → sensors → connectivity → software → data → cloud → AI → maintenance.

The most relevant competition-law risks therefore concern dominance, interoperability, data access, tying, technological lock-in, exclusivity, vertical foreclosure, aftermarket restrictions, algorithmic coordination and technology acquisitions.