Wednesday, March 10, 2010

Voting Equipment Company Resolves U.S., State Concerns over Acquisition

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Election Systems & Software, Inc.—the largest provider of voting equipment systems in the United States—has agreed to settle an antitrust complaint filed by the U.S. Department of Justice and nine state attorneys general, challenging its 2009 acquisition of Premier Election Solutions Inc.

A proposed consent decree, awaiting approval in the federal district court in Washington, D.C., is intended to restore competition lost as a result of the consummated acquisition by requiring ES&S to divest voting equipment systems assets to a buyer approved by the Justice Department.

The assets to be divested include the means to produce all versions of Premier’s hardware, software, and firmware used to record, tabulate, transmit, or report votes, including the Assure 1.2 system, and a license to better serve disabled voters.

Combination of Close Competitors

The federal and state antitrust enforcers alleged that the consummated transaction violated the Clayton Act by combining what customers considered to be the two closest competitors in the provision of voting equipment systems. The two companies were certified in more jurisdictions than any other vendor, offered a complete suite of voting equipment system products, and had good reputations.

The investigation of the transaction did not begin until after the companies had combined their assets and dismantled many of Premier’s operating divisions. ES&S was not required to report the proposed acquisition to the Justice Department and FTC because the cash value of the transaction was $5 million, significantly below the mandatory reporting threshold for mergers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Senator Schumer’s Concerns

Soon after the acquisition was announced, however, the Justice Department heard from critics of the transaction. Senator Charles E. Schumer, chairman of the Senate committee that oversees election issues, sent a letter to U.S. Attorney General Eric Holder, urging the Justice Department to conduct a full and fair review” of the acquisition. A news release on Senator Schumer's reaction appears here.

The Chairman of the Senate Rules and Administration Committee later announced that the committee’s staff would launch a formal review of potential problems posed by the merger. A report expressing the committee’s concerns with the acquisition was submitted to the Justice Department in January.

American Antitrust Institute Views

Also in January, the American Antitrust Institute (AAI) sent a letter to Christine Varney, Assistant Attorney General in charge of the Department of Justice Antitrust Division, stating that the “likely competitive harm from the acquisition will be felt in the loss of any real competition in the competitive bidding process by which political subdivisions acquire voting technology and services.”

AAI “urge[d] the Division to strictly scrutinize this transaction and ensure a final remedy that preserves and promotes competition among multiple, qualified private vendors of voting technology and services to all political subdivisions in the years to come.”

Text of the letter appears here.

The state attorneys general that joined the suit were Arizona, Colorado, Florida, Maine, Maryland, Massachusetts, New Mexico, Tennessee, and Washington.

A Department of Justice press release appears here. Text of the complaint and the proposed consent decree in U.S. v. Election Systems & Software, Inc., Case 1:10-cv-00380, appear on the Department of Justice Antitrust Division website. Further details will be reported in CCH Trade Regulation Reports.

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