The Honorable Eric Holder
United States Department of Justice
950 Pennsylvania Ave. NW
Washington, DC 20530-0001
Christine A. Varney, Assistant Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
Thomas E. Perez, Assistant Attorney General
Civil Rights Division
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
RE: ES&S Purchase of Diebold/Premier: Remedies for Unlawful Concentration of Market Power and Other Public Injuries Within DOJ Jurisdiction
Dear Attorney General Holder, Assistant Attorney General Varney, and Assistant Attorney General Perez:
The undersigned organizations and individuals possess nationally recognized expertise in voting systems technologies, local and State election administration, and in removal of barriers to voting participation. We have cooperated in the preparation of this letter that seeks to address appropriate remedies for ES&S's anticompetitive disruption of the relevant markets and the threats thereby posed to American election integrity.
We are deeply concerned about the public impact of ES&S's purchase of Diebold's Premier Election Solutions, Inc. ("PESI"), referenced here as the "merger." Fortunately, the Federal Government has expedited its research into purchaser ES&S's accelerated absorption of PESI assets into ES&S and the business goliath's concerted attempt to achieve a de facto dissolution of PESI before the DOJ can act.
We commend the DOJ's Antitrust Division ("AD"), the U.S. Senate Rules Committee, and the Congressional Research Service for their swift research to document and assess this merger's legal, economic, and fiscal impact on voters, election administration, taxpayers, local and State governments budgets, and other public interests.
Based on our extensive experience in the voting systems equipment, procurement and services arena, we would like to bring forward an outline of antitrust remedies that we believe would redress the major market injuries and the merger's broad-based detrimental public impact. We additionally would like to request that the Department of Justice utilize other statutory authority, pursuant to U.S. voting and civil rights laws, to rectify public injuries that have been sustained or that are threatened by this merger.
As you know, we do not have access to the evidence the Government has gathered and evaluated. Our expertise in the voting systems and services markets, however, and our review of public domain information, lead us to conclude that the Government will likely have documented substantial current and threatened antitrust injuries that warrant DOJ's intervention. For purposes of setting forth important remedies that are needed to protect the larger public interest in legitimate elections with accurate vote counts and correctly reported election winners, we set forth the following propositions as our working assumptions.
I. Anticipated Factual & Legal Conclusions
A. Discrete Markets Have Suffered Harms Cognizable as Antitrust Injuries
ES&S's business conduct, and particularly its purchase of PESI, impacts a number of separate markets that collectively constitute the election administrative goods and services marketplace. In addition to the high expenditure/capital goods voting equipment market, other discrete election products and services markets have been and continue to suffer injuries traceable to this sale/merger. These discrete markets, which previously were largely comprised of smaller local or regional companies, include:
� Ballot design
� Paper ballot printing (which may include absentee ballot mailings)
� Election Day precinct supplies & support
� Programming of e-voting machines, other technical equipment
� On-site election office support services
� Maintenance services for technical equipment (voting and registration devices and
� Election readiness testing of technical equipment (voting and registration devices and
Some vendors operate in only one of these markets while others are market participants in
several of these areas.
B. Unlawful Anticompetitive Impact
The merger has generated anticompetitive impact on election equipment and services
markets, including excessive control over the relevant markets. This market power in turn
has produced or will produce:1. High barriers to market entry for prospective new vendors, and high barriers to other
vendors in their attempts to negotiate continuation of their contractual relationships;
2. Fewer governmental-customer choices in voting system products, support services,
packaged combinations, and contractual-pricing terms; and,
3. Artificially inflated prices and other coerced contractual terms.
C. History of ES&S Anticompetitive Market Conduct:
Buyer ES&S's record of anticompetitive market conduct includes:1. Legally proscribed tying arrangements to achieve vertical integration and market
2. Predatory pricing of goods and services; and
3. Threatened breaches of contracts on the eve of elections, unless the election jurisdiction
agreed to ES&S's unilaterally determined price increases for essential goods (e.g. ballots) and
services (e.g., technical maintenance and testing of voting equipment) that had been
previously negotiated and approved for local or State fiscal planning.
D. ES&S Conduct Post-Merger Designed to Obstruct DOJ Remedial Options
ES&S engaged in conduct which appears to have been deliberately designed to vitiate the
Antitrust Division's (AD) scope of available remedies, and specifically the Government's
ability to unwind the sale as by a divestiture of PESI. Given the market share of the
resulting corporate entity and other factors that justify DOJ review, buyer ES&S should
reasonably have known that DOJ-AD would examine the merger. ES&S conduct that sought
to obstruct DOJ's vindication of the antitrust laws and larger public interest includes:1. Taking physical possession and control of all PESI intellectual property and business
records within a few days of the sale/merger;
2. Rapidly renegotiating contracts with local election jurisdictions, to transfer them to ES&S
products and services at steep discounts if the contracts were executed quickly, thus
eviscerating the PESI business relationships;
3. Discharging PESI employees, so that virtually no qualified workforce would remain to
manage and execute PESI's business if DOJ required ES&S to divest PESI; and,
4. Undertaking an arguably deceptive sales effort to excise some low-value PESI assets in
order to unilaterally and superficially restructure the voting products and services markets,
with the objective of superficially restoring competitive market conditions while also not
actually reducing or endangering the ES&S dominant market share.
In sum, ES&S's restrictive contractual provisions intensify the dependence of local and State
governments on one privately held firm for their mission-critical election operations. ES&S's
vertically integrated business model and standard terms greatly reduce the opportunities for
smaller vendors to offer goods and services to governmental units. The terms also augment
the opportunities for ES&S vendor intimidation of governmental customers in ways that
threaten the integrity of elections. ES&S's oligopolistic control over the market (an estimated
70% share) and the injuries inflicted by this degree of market power will likely escalate
unless DOJ-AD redresses ES&S's problematic contractual provisions as part of the remedies
II. Recommended Remedies
The undersigned submit that the history of ES&S's market conduct, its degree of market
share, and its current business practices present substantial and ongoing threats to critical
markets whose goods and services are currently required to conduct American elections.
We believe DOJ-AD should structure remedies that will restore and improve competition in
the relevant markets and also protect the American people's larger interests in verifiably
accurate elections that a legitimate, trustworthy democracy demands. No simple divestiture
of some few previously PESI-owned assets will suffice to redress existing injuries and
prevent imminent, foreseeable harms. Therefore, we urge you to consider imposing the
following remedies to protect the democratic system that preserves our Republic.
A. Prohibit ES&S From Conducting Business Under Contractual Provisions that
Undermine Competitive Market Conditions and Unfairly Perpetuate Oligopolistic
Background and Rationale: Standard form ES&S election equipment contracts bar their
governmental customers from permitting third parties - which includes smaller vendors -
from (a) servicing ES&S-marketed equipment and from (b) modifying such equipment to
render it interoperable with hardware and software developed by other vendors or by the
ES&S contracts often also require customer governments that choose ballot scanning
equipment to (c) order their paper ballots exclusively from ES&S. In some cases, ES&S's
initial pricing for ballots can be described as "loss leaders" that are designed to entice
customers from their current vendors, whose business will experience severe losses. ES&S
has also mandated exclusivity in providing other election goods and services in a
prototypical tying arrangement.
The classic models obtain here, for after forcing other vendors out of business, the market
predator can raise prices, even to recover its income losses from earlier loss-leader pricing.
The predator's normal ability to raise prices significantly can be augmented by restrictive
tying arrangements, like those of ES&S, that bar customers from access to other vendors for
the needed goods and services. ES&S contractually requires customers to waive access to
other vendors for substitute or alternative goods and services, thus producing a captive
customer base subject to duress and extortionist pricing after ES&S has forced the other
market participants to abandon their election products and services business lines.
DOJ Actions Recommended: With DOJ-AD retaining monitoring power over the next 36
months:1. Void all contracts ES&S has negotiated with former PESI jurisdictions in the post-merger
period to the present, as they were products of oligopolistic market-share control and threats
(to deprecate-- no longer support--PESI GEMS software and other products). Unless these
agreements are voided, ES&S will reap the fruit of its anticompetitive conduct and
perpetuate the markets' anticompetitive conditions.
2. Invalidate and prohibit the enforcement of ES&S contractual provisions that vertically
integrate in exclusive tying arrangements goods and services that can be separated; apply
these prohibitions to all ES&S's existing contracts with election jurisdictions and forbid these
clauses in future contracts.
3. Ensure that election jurisdictions possess the legal authority to use their ES&S and PESI
voting, registration, and other hardware without being required to use ES&S software.
4. Require ES&S and/or the successor owner(s) of PESI assets to withdraw the plan to
deprecate GEMS and other Diebold-Premier equipment and software, and instead to service
and support these PESI products for at least 5 years.
5. Require ES&S to divest itself of a specified percentage of the election equipment and
services contracts in each State for a minimum of three years. Or, restrict ES&S to supplying
goods within only one market - such as the voting systems equipment market -- and then
bar ES&S from also providing technical services, ballot design and printing, election
support, and equipment maintenance services to the same jurisdiction. In other words,
prohibit ES&S from seeking and signing vertically integrated product and services contracts.
6. Require of ES&S, and of any successor entity that purchases PESI assets, to provide to
other vendors and service providers who desire to become ES&S product resellers and
suppliers: (a) reasonable terms and authority to sell, lease, and service ES&S voting system
equipment and other election products; (b) ample supplies of voting system and ancillary
products at fair wholesale prices; and (3) inclusion of these resellers and service vendors'
personnel in ES&S training programs.
7. Require ES&S to post on a publicly accessible website, human-readable, search-engine
usable copies of goods and/or services contracts the firm executes with any government or
election jurisdiction, including all appendices, addenda and amendments; also require ES&S
to post every contract it currently holds with a government or election jurisdiction to
provide election services or products.
B. Require Continuation of PESI's Efforts to Achieve Increased Electoral
Background and Rationale: In response to a growing demand for more transparent voting
equipment that permits greater public accountability, PESI was reportedly taking steps to
release some or all of its software code into the public domain. An open system would
enable customers and the public to independently assess the reliability, accuracy, and
integrity of the electronic balloting and tabulation systems used in their elections.
In a New York Times Magazine article on electronic voting equipment failures, a PESI
representative reported his company's stance open source software in technical election
equipment. He underscored PESI's desire to increase voter trust and satisfy the growing
demand from customers for more accountable, transparent elections systems:
[T]he Diebold [PESI] spokesman, Chris Riggall, admitted. that the company is
considering making the software open source on its next generation of touch-screen
machines, so that anyone could download, inspect or repair the code. The pressure
from states is growing, he added, and "if the expectations of our customers change,
we'll have to respond to that reality." 1
PESI undoubtedly recognized that open source software not only provides public access to
the election tabulation code but that impartial computer scientists can both participate in
upgrading the code and scrutinize it closely to identify bugs and other flaws that impede the
capacity to produce accurate vote counts.
These PESI's plans to improve electoral transparency and accountability, however,
threatened the competitive status quo. If PESI had remained independent, such a move
would have radically changed voting system industry practices by increasing the
competitive pressure on ES&S to provide its customers publicly accountable voting systems.
By purchasing PESI, ES&S eliminated the only major competitor that planned to transform
and heighten the public's expectations of voting system accountability.
DOJ Actions Recommended Because ES&S benefitted in legally proscribed ways from its
acquisition of PESI, DOJ should require ES&S to continue PESI's work toward increased
public transparency and auditability. Steps should include:1. Require ES&S contracts for goods and services sold for use in U.S. elections to include
authorization of election observers and independent computer science consultants (whether
local or State-authorized) to assess the system and data integrity, including the equipment's
capacity to produce accurate vote totals. DOJ should inter alia require ES&S to permit access
to the ballot definition files, to the underlying election database(s), and to other electronic
data that can be scientifically evaluated.
2. Require ES&S to cooperate fully in any election assessment or inquiry that in any manner
questions the performance or accuracy of ES&S products or services, and to permit
independent election investigators to have access to all relevant or material information,
including the source code, that the investigators consider necessary to the forensic inquiry.
3. Consider requiring ES&S to release into the public domain the Unity, GEMS, and Assure
source code and builds, and concomitantly revise these source codes from proprietary to
open source. Alternatively, DOJ could require ES&S to make its election equipment
software available for frequent auditing and inspection by a select group of experts, such as
1 Clive Thompson, New York Times Magazine, Can you Count on Voting Machines (Jan. 6, 2008), at 9.
computer professionals and election integrity advocates.
C. Require ES&S to Continue PESI's Effort to Serve Voters With Disabilities By
Identifying Alternatives to the AutoMark Voting Machine
Background and Rationale: HAVA requires States and counties to supply functioning,
accessible voting equipment. Compliance with HAVA is essential to ensuring every that
person, no matter their disability status, is extended the right to vote privately and
ES&S owns the AutoMARKT line of voting machines, which is the dominant HAVAcompliant
product for voters with disabilities. AutoMARK has become the de facto choice for
counties and states nationwide. Both ES&S and PESI distributed AutoMARK but PESI was
developing an alternative to AutoMARK. Such a move would have provided a muchneeded
spur to making more options available.
DOJ Action Recommended: Require ES&S to divest itself of the PESI assets related to
producing an alternative to the AutoMARK, including research notes and business planning
documentation, and transfer to the purchasing firms the PESI research personnel primarily
assigned to design and bring to market additional accessible ballot marking devices. See
FTC Divestiture Study, at 40-41.
D. Require Buyers of PESI Assets to be Qualified to Compete in Jurisdictions that
Mandate Paper Ballots
Background and Rationale: A number of electoral jurisdictions require vendors to offer
paper-ballot voting systems. As important as this condition precedent is to transparent and
verifiable elections, some vendors do not include within their product lines an optical
scanner-paper ballot set of balloting and tabulation options.
DOJ Action Recommended: Require all prospective buyers and contractors of ES&S/PESI
election jurisdiction business opportunities (that are relinquished as a part of this DOJ
challenge) to qualify for the contract by demonstrating they are or would be qualified to
offer paper-ballot systems. A vendor's plan to purchase or lease the PESI optical scanning
assets and thereby support paper-ballot jurisdictions systems should be considered
acceptable satisfaction of the requirement.
E. Require ES&S to Modify Its Voting Systems Design Criteria and Marketing
Practices to Permit Interoperability with other Vendors' Components
Background and Rationale: ES&S utilizes proprietary components and unique software
data formats that undermine competitive markets and block the realization of the public's
interests in transparent and verifiable elections. These design choices thwart election
officials' ability to customize their voting system equipment by combining several vendors'
products into a functioning voting system. For instance, we understand that Kodak
manufactures several high speed, high volume scanner models with performance metrics
that exceed those of voting system vendors. Kodak's pricing is considerably lower than the
voting system vendors' pricing for their inferior scanners. But owing to current ES&S system
criteria (and to be fair, some jurisdictions' certification rules), election officials cannot choose
to combine a Kodak scanner with other ES&S components and save substantial funds.
If DOJ were to require ES&S to adopt strategies that foster interoperability, significant
benefits would accrue to the market, to potential market participants, and to taxpayers and
voters. Election officials could choose from a broader array of products and services; the
relevant markets would experience significantly more competition with many more vendors
able to participate; and the cumulative impact would be to exert a substantial downward
pressure on voting system pricing.
Local and State governments have sustained dramatic increases in their election
administrative costs in large part owing to their being a captive market required to comply
with federal election law governing voting technologies. ES&S's refusal to participate in
standardizing data formats is one tool by which this vendor exerts excessive control over the
voting system market and preempts new competitors, third party suppliers, and service
The omission of standardized data formatting across vendors also imposes barriers between
vendors' goods and services, both inter-vendor and intra-vendor. Unable to contract with
third-party service and goods suppliers, election offices are thereby consigned to
dependence on the voting system vendor, chiefly ES&S, to provide the necessary interfaces
and other work that cumulatively permit the voting and tabulation system to function.
These same unique data formats impede public accountability efforts designed to determine
whether the machines are accurately counting and reporting votes, and producing useful
election records. This "Tower of Babel" result at best, adds expense and complexity to U.S.
elections. At worst, the practice opens our elections to the possibilities that particular
election results will have been manipulated by foreign interests, in undetectable and
untraceable ways. The American people deserve meaningful, honest elections, with
standardized data formats that allow larger windows into vote counting and reporting.
DOJ Actions Recommended:
1. Require ES&S to undertake a good faith effort, in conjunction with other election
equipment vendors, governmental election policymakers, voter advocates, and independent
voting systems scientists, to develop market-wide common data formats and greater
standardization of voting system and related election equipment components, and to then to
implement the collaborative conclusions into their own products and services.
2. Prohibit ES&S from including contract provisions that bar the copying or printing of
output from any ES&S components or software.2
3. Require ES&S to work with election accountability and voter advocacy organizations to
ensure that election tabulations, ballot definition files, and all other mission-critical software produced
election outputs can be fully audited.
2 For an example of the problematic uses of these contractual barriers, see the "prohibited uses" clause in this
F. To mitigate the increased threat to national security generated by this merger,
require ES&S to divest sufficient assets, reduce its contractual control over
election jurisdictions, and take other appropriate actions.
Background and Rationale: The consolidation of the voting system market resulting from
this merger creates a near monoculture. That is, a single vendor controls the vast majority of
election jurisdictions including those of several entire states. This monoculture creates new
risks of "wholesale" election failure, both intentional and unintentional. Since election
failure on a large scale has the potential to destabilize the Nation, DOJ should assess and
remedy these risks on the basis of their presentation of real threats to U.S. national security.
(See Exhibit A attached; Statement of Dr. David Jefferson).
DOJ Action Recommended: Require ES&S to divest sufficient assets, reduce the scope of
election jurisdictions subject to its software; and take other actions to mitigate the increased
threat to national security arising from this merger.
The undersigned organizations and individuals appreciate the opportunity to recommend
for DOJ's consideration the foregoing remedies for ES&S's excessive market power and
anticompetitive conduct in the elections equipment and services markets. We thank the
Department of Justice for investigating this sale and for your sincere efforts to understand
and redress the complex public injuries it engendered.
Should you have any questions or desire any additional information, please contact
Professor Candice Hoke or Attorney John Bonifaz, who will transfer the requests. The
Appendix (Statement of Dr. David Jefferson on national security implications of the merger)
follows the signatory list.
Very truly yours,
Candice Hoke, Assoc. Professor of Law, Cleveland State University
John Bonifaz, Legal Director, Voter Action
Edward A. Hailes, Jr. General Counsel, Advancement Project
Bob Edgar, President, Common Cause
Rob Richie, Executive Director, FairVote
Pamela Smith, President, Verified Voting Foundation
Paul A. Lux, Supervisor of Elections, Okaloosa County, Florida
Harry Sawyer, Supervisor of Elections, Monroe County, Florida
Ion Sancho, CERA, Supervisor of Elections, Leon County, Florida
Barbara Simons, Ph.D., Member, U.S. EAC Board of Advisors
Dan McCrea, President, Florida Voters Foundation
Arlene Levy, Vice President, League of Women Voters of Greater Pittsburgh
Collin Lynch, Ph.D., Intelligent Systems Program, University of Pittsburgh
Marybeth Kuznik, President, VotePA
Bernie Ellis, Gathering To Save Our Democracy TN
Mary Ann Gould, Founder, Coalition for Voting Integrity PA
Luther Weeks, Executive Director, Connecticut Voters Count
Rebecca Wilson, Co-Director, SAVE our Votes MD
Kevin Zeese, Executive Director, TrueVote.US
Affiliations are for identification purposes only