Business Law

Competition over Voting Machines

When you go to cast your vote, your thoughts are mostly on which candidate to support. You probably pay little attention to the actual machine. However, the machine used to cast your ballot has been the subject of recent government investigations and lawsuits.

The Justice Department (DOJ) has had some concerns over one company controlling all voting machines and filed an antitrust law suit against the biggest maker.

Election Systems & Software

Election Systems & Software (ES&S) is the nation's largest voting machine maker. Forty-three states and about half the votes in the last four major US elections have used their machines.

Last September, ES&S bought Premier Election Solutions (formerly called Diebold Election Systems), the second-largest voting machine maker. Its machines were used in 33 states.

After buying Premier, ES&S produced more than 70 percent of the voting equipment in the US - a clear monopoly. As a result, the Justice Department and nine states sued ES&S based on civil antitrust and anti-competition concerns. They forced the company to sell the voting machines and assets it recently purchased.

Competition Laws and Antitrust

Antitrust laws comes from the idea that free market competition creates the largest choice of products and services, and gives consumers the best terms and prices. The government created antitrust laws to maintain competition by preventing unreasonable monopolies. There are two main areas of antitrust violations: Monopolization and agreements to restrain trade. Agreements to restrain trade include price-fixing, bid rigging, allocating customers or markets, and boycotting competitors or suppliers. By engaging in any of these actions, you're breaking several laws and may have criminal charges brought against you.

Monopolization is when one company restricts competition by having a majority of the market share. The company's size and market position is taken into account. Abuse of market power can take many forms, including predatory pricing (setting prices so low you gain a market share; undercutting the competition) or improper refusals to deal.

In many mergers and acquisitions, monopolization is a concern. Government approval may be required before the deal is signed.

Why Does This Matter?

Besides fearing that ES&S will have such a large share in the market and reduce competition, there are also broader concerns for democracy.

If one company controls all of the voting machines, the main fear is that the voting system may deteriorate, being less secure and reliable. It's necessary to ensure voting machines continue to be accurate and having more companies manufacturing these machines ensures better systems.

Competition creates incentives for improvements and better results for the entire market. If one company has control over the market, it may be less inclined to invest in improving the machines.

The Justice Department and the states who started the lawsuit are concerned that ES&S would force its equipment on the rest of the market and stop supporting the Premier equipment. They fear that not only will the machines be less effective, but that this could negatively impact our voting.

What's Next?

The Justice Department proposed a settlement that would dissolve the merger and force ES&S to sell its Premier business to a buyer approved by the Justice Department. ES&S will also have to sell all of the intellectual property associated with Premier's software, as well as its inventory and parts.

Also, ES&S will grant a license to use its AutoMark system to whoever buys the Premier business. The system is a ballot marking device for disabled voters that Premier had a license to use before the acquisition.

The proposed settlement also gives customers flexibility. Whoever is under contract to use Premier Systems will have the option to remain with ES&S or switch to the new buyer.

Won't This Disrupt Elections?

To make the transition as smooth as possible and to avoid disrupting future elections, the Justice Department requires ES&S to meet certain expectations. These include giving existing Premier customers access to experienced employees and continuing to supply customers until the new buyer can create their own machines.

ES&S has agreed to cooperate with the Department of Justice.

Questions for Your Attorney

  • How does the Justice Department have the authority to undo mergers?
  • Do antitrust laws apply to all businesses or just larger ones?
  • Why does it matter if one company owns a majority of the voting machines?
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