In 2018, a domain was registered. The competition has recently registered a trademark that matches the domain and has threatened legal action if the domain is not relinquished.
Has anyone gone through a similar situation and if so, what was the outcome of the case?

The possibility exists that the domain could be taken away. As the issue is legal rather than technical, the judicial system is susceptible to corruption and influence.
The experiences of others will not serve as evidence in court, so seeking legal counsel is imperative to determine the strength of your case and the likelihood of success based on factors such as the primary use of the domain and the court's predisposition towards your situation versus that of your rivals.

In our situation, there was a slight issue where a domain (established since 2002) was being threatened by an attempted trademark registration. Initially, the trademark registration was denied due to the potential for confusion, but we sought legal counsel from a specialized lawyer who helped us argue that our business and the competing business were fundamentally different.

It is important to find a competent lawyer who understands legal issues related to domains. As mentioned previously, the outcome of the case can often hinge on the judge's expertise in these matters.

If the plaintiff loses a court case to claim ownership of a domain, serious penalties could be incurred. In cases heard by WIPO that have been determined to have no grounds for legal action, claims of "abuse of law" may be applied.

If an attempt is made to seize a domain that has been established for longer than the trademark, a ruling for the reverse seizure of the domain may be issued. The owner of the domain can then pursue compensation through regular court proceedings with a high possibility of success. There have been cases where companies have lost significant amounts of money from legal fees and penalties, such as HVAC Company's loss of $40k and Appfollow's loss of $1.5k in legal fees after failing to secure a domain that was available for purchase.

It is important for trademark owners to realistically evaluate their chances of success and consider negotiating the purchase of the domain outside of legal proceedings to avoid unnecessary expenses. Additionally, unsuccessful attempts to claim a domain can damage a company's reputation and limit future opportunities to purchase the domain.