March 24, 2010

DOJ Casts Deciding Ballot To Restore Competition In Voting Machine Market

The U.S. Department of Justice is seeking to restore competition in the voting machine market by requiring Election Systems & Software, the country’s largest seller of computerized voting machines, to undo much of its recent merger with Diebold.  DOJ will allow this merger of the nation’s two largest sellers of such machines to survive only if the combined company divests itself of the product lines it acquired.

Back in September, we wrote about a private antitrust suit filed challenging this merger.

In the merger, Election Systems & Software, the country’s largest seller of voting machines, bought the voting machine unit of the country’s number-two biggest seller, Diebold.  Diebold, of course, made some news back in 2003, when its CEO announced that he would “deliver” Ohio for George W. Bush in the 2004 election.  Not surprisingly, this comment made people take a close look at the electronic voting machine systems that have become standard fare since the epic election courtroom battles that took place during the 2000 presidential election and culminated in the Supreme Court’s Bush v. Gore decision. 

Last September, when privately held ESS took over Diebold’s voting equipment unit (called Premier), competitor Hart Intercivic Inc. cried foul, claiming that the merged company would control two thirds of the voting machine market in the country.

DOJ is stating that it will permit the merger to continue only if ESS sells “all of the intellectual property associated with all versions – past, present and in development – of the [Diebold] voting equipment systems to another company,” according to the DOJ’s press release.  “ESS also must divest all Premier tolling and fixed assets, as well as inventory of parts and components.”  But that does not mean that the merger was pointless.  Justice’s press release states that the conditions affect only ESS’s ability “to produce” voting systems.  According to The Wall Street Journal, ESS may still have the right to service the machines.

The Justice Department did not review the merger until after it occurred, because the transaction did not reach the $5 million threshold that triggers pre-clearance under the Hart-Scott-Rodino Act.  Instead, the DOJ, along with the attorneys general of nine states, filed suit in the District of Columbia on March 8, 2010, and at the same filed a proposed settlement with the Court.  The Court must approve the settlement for it to take effect. 

And what about the Hart company that started the ball rolling?  Maybe that suit will continue.  But, according to the Wall Street Journal, the most likely buyer of the voting systems that ESS is divesting is . . . none other than Hart.  Sounds like a vote of confidence for antitrust enforcement.

Categories: Antitrust Enforcement

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