Justice Department Requires Key Divestiture in Election Systems & Software/Premier Election Solutions Merger

The Department of Justice announced March 8 that it will require Election Systems & Software (ES&S) to divest voting equipment systems assets it purchased in September 2009 from Premier Election Solutions Inc. in order to restore competition.

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. The department said that today's settlement will restore competition in voting equipment systems in the United States and that, without the divestiture, the acquisition would result in higher prices, lower quality and a reduced incentive to innovate.

The Department of Justice's Antitrust Division, along with nine state attorneys general, filed a civil antitrust lawsuit today in U.S. District Court in Washington, D.C., alleging that the transaction harmed competition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the department's competitive concerns. The state attorney general offices are: Arizona, Colorado, Florida, Maine, Maryland, Massachusetts, New Mexico, Tennessee and Washington.

Under the terms of the settlement, ES&S must divest all of the intellectual property associated with all versions-past, present and in development-of the Premier voting equipment systems to another company. ES&S also must divest all Premier tooling and fixed assets, as well as inventory of parts and components. In order to allow the divestiture buyer to better serve disabled voters, ES&S must also grant a fully paid-up, irrevocable, perpetual license to use the AutoMARK, ES&S's ballot marking device for which Premier had a limited license prior to the acquisition. The buyer of the divestiture assets will have the right to modify and improve both Premier products and the AutoMARK.

ES&S must sell the divestiture assets to a buyer approved by the department. The settlement prohibits ES&S from bidding on new voting equipment system contracts using the Premier equipment. The department also required that ES&S grant the divestiture buyer an opportunity to compete to provide services to Premier customers currently under contract with ES&S, giving customers the option to switch to the divestiture buyer or to remain with ES&S. The department said that this option addresses customer concerns that an outright divestiture of service contracts would disrupt the administration of upcoming primaries and general elections. ES&S also must provide access to knowledgeable Premier employees and agree to offer a supply agreement to allow the divestiture buyer time to establish its own manufacturing of voting equipment systems.

The proposed settlement, if approved by the court, would be in effect for 10 years.