Son in law treats granddaughter that is not his different than the ones that are his

I really feel for you it's heart breaking to see your grandchild being so badly treated but it won't go away and from my own experience the situation and his behaviour towards her will become worse especially when she reaches her teenage years speak to your daughter in a non judgmental way you might find she has already noticed his behaviour and doesn't know how to deal with it or who to talk to about it at the end of the day it's a child's happiness at stake.

Time will heal all wounds. Take a look at this doc tolovehonorandvacuum.com/2014/01/husband-bad-stepfather

I haven't read the whole thread but a couple of things do strike me. Firstly, people rarely challenge a biological parent's love but often look more closely at a step-parent's. Before you make any move at all, search your conscience and ask yourself if perhaps you are looking for differences. I am not saying you are but it does happen.
Secondly, make sure your DG is not making that eternal triangle that which kids are so good at which plays your SIL off against you. Once again, I'm not saying she is, but sometimes our protective instincts are easily used against us.
Thirdly, if you are sure you are right, ask your daughter how she would like you to handle this based on the message that you love her, you love your GCs but are genuinely concerned. Ask her if she would like you to challenge your SIL's behaviour or make a record. Ask her if she is scared of him or if she has trouble making herself heard. Maybe suggest that family therapy might help because your GC is very troubled and everybody would have a chance to express their worries.
I used to worry my husband was harder on my DS, my son even used to complain about it when he was young but surprised me when he was 17 by asking his step-Dad to adopt him and now they have a closer relationship than he has with his own children.

My second husband lived with my children and I for years until they left home to go to university, work and homes of their own. He would NEVER have raised his voice let alone a belt (dreadful) to them. Nor was he ever anything other than a caring, steadying presence in their lives, ok he could be grumpy on occasion but never directed at them. You must seek professional advice on how to proceed with this,

I am in a similar position. I have DGC who say they want to stay with me because of their treatment at home. I have tried to speak to their mum but I get threats too. The DGC are shouted at nearly all day and I do too if I step out of line in the eyes of the parents. It may be that the parents of today are so stressed with acquiring things that we took years to get when we were young parents. It is all so stressed and the shouting and threatening is not good for the young children or the old grandparent. It cant even be good for the parents as I am sure they must have terrible blood pressure.
Dealing with life in a more relaxed way and consider the children would be better for everyone.