I mean this failed with the automotive industry. Many different strong laws were passed over the decades to ensure that anyone could repair their car, you can't refuse to sell them parts, you can't sue them for aftermarket, etc. etc.
The end result? You can't do anything to a modern car without going to a manufacturer and using their locked-in ecosystem entirely. They have been caught doing every trick they were told not to do and they get away with it.
Ultimately in this case it's a courts problem and not a law problem. The only place where law might be the issue would be in limiting damages for the companies in question.
It's simply easier for them to take all the extra profit they're getting and deflect lawsuits. From an American standpoint, that means the manufacturers are getting too much out of the deal and the only way to fix that is to make the lawsuits more painful. Because it's not like it's manufacturers vs. the public - it's really the manufacturers vs. third-party repairers AND the public.
For what it's worth, generally in the US you can still buy a limited time subscription to the manufacturer's own diagnostic software for a reasonable price, for example BMW ISTA is $32/day, VW ODIS is $130/week, and Ford FDRS is $50 / 2 days. This is enough to complete most module replacement or upgrade tasks for a hobbyist, and still cheaper than dealership labor costs.
There's also a standard for the dongles (which specifies a DLL export interface from a driver, amusingly) called J2534 so you don't need a separate hardware interface for each make, although to your point, the way the laws around J2534 were written was too lax and some manufacturers have realized that there is a loophole where only certain diagnostic tasks like module reflashing need to be possible over J2534.
Also worth noting that reverse engineered software has generally not been majorly threatened by manufacturers in the automotive space; Forscan for Ford, VCDS and OBD11 for VW, and so on are all quite popular.
Unfortunately "security" restrictions especially in the EU and the uprise of ADAS systems has made things a lot harder; most makes now have some online challenge/response cryptography (ie VW SFD) for diagnostics where previously they had offline login, and most ADAS and camera systems require extremely expensive calibration jigs (this is a valid technical problem, but with no incentive to reduce cost or make these systems accessible, they end up being comically expensive).
Anyway the situation in automotive is way better than the situation in equipment and ag, so I don't think it's entirely fair to say that regulation was a complete failure.
Thank you! Everything you say is accurate and matches up with my experience. The connectors and stuff you can purchase as a regular consumer barely offer the ability to read or clear diagnostic codes and swapping almost any part requires a specialized connector or thing to connect to. For example, doing even the most basic sensor replacement or heaven forbid a ECM swap. I am thinking of scenarios where Grandma calls and has a Kia where a basic sensor is malfunctioning. You'll be paying out the nose to do Kia authorized things that only Kia will let you do, and the change of that being under $1000 is virtually zero.
A KDS subscription is $30 / 3 days.
https://kiatechinfo.snapon.com/J2534DiagnosticsAndProgrammin...
They claim that only an expensive J2534 interface is "recommended" (a weasely way to get around compliance requirements, although J2534 is also a terrible standard and frequently not compatible) but based on what I've read, the Kia software (KDS) is really simple and even cheap J2534 cables like a GD101 ($30) will work fine.
At this point you have the same software as the dealer would have, so any sensor related issues should be solved (besides ADAS, which like I mentioned is definitely a problem due to the need for calibration jigs). You could swap in a new ECM this way. Not even a dealer can swap a used ECM on some Kias; although in this case there are reverse engineered reflashing tools that work in most cases, too (this is kind of an intentional gap in right to repair, especially in Europe - there's a strong drive to eliminate the used car control modules market because it is heavily associated with organized crime).
I really don't find auto diagnostics to be as sinister as people think they are, or the regulation a complete failure. You can, due in large part to regulation, wade into the morass of horrible dealership diagnostics software if you want, for a limited entry fee.