[Federal Register Volume 75, Number 49 (Monday, March 15, 2010)]
[Notices]
[Pages 12256-12270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5519]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States, et al. v. Election Systems and Software, Inc.; 
Proposed Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States, et al. v. Election Systems and Software Inc., Civil Action No. 
10-00380. On March 8, 2010, the United States filed a Complaint 
alleging that the proposed acquisition by Election Systems and 
Software, Inc., (``ES&S'') of Premier Election Services, Inc., and PES 
Holdings, Inc. violated Section 7 of the Clayton Act, 15 U.S.C. 18. The 
proposed Final Judgment, filed the same time as the Complaint, requires 
ES&S to divest certain tangible and intangible assets.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481), on the Department of Justice's Web site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, 
U.S. Department of Justice, 450 Fifth Street, NW., Suite 8700, 
Washington, DC 20530 (telephone: 202-307-0924).

Patricia A. Brink,
Deputy Director of Operations.

United States District Court for the District of Columbia

CASE: 1:10-cv-00380
Assigned To: Bates, John D.
Assign Date: 3/8/2010
Description: Antitrust

    UNITED STATES OF AMERICA Department of Justice, Antitrust Division, 
450 5th Street, NW., Suite 8700, Washington, D.C. 20530; STATE OF 
ARIZONA Office of the Attorney General, 1275 West Washington, Phoenix, 
Arizona 85007; STATE OF COLORADO Office of the Attorney General, 1525 
Sherman St., Seventh Floor, Denver, Colorado 80203; STATE OF FLORIDA 
Office of the Attorney General, PL-01, The Capitol, Tallahassee, 
Florida 32399; STATE OF MAINE Office of the Attorney General, 6 State 
House Station, Augusta, Maine 04333; STATE OF MARYLAND Office of the 
Attorney General, Antitrust Division, 200 St. Paul Place, 19th Floor, 
Baltimore, Maryland 21202; COMMONWEALTH OF MASSACHUSETTS Office of the 
Attorney General Martha Coakley, One Ashburton Place, Boston, 
Massachusetts 02108; STATE OF NEW MEXICO Office of the Attorney General 
of New Mexico, 111 Lomas Blvd. NW., Suite 300, Albuquerque, New Mexico 
87102; STATE OF TENNESSEE Office of the Attorney General and Reporter, 
425 Fifth Avenue North, Nashville, Tennessee 37243; and STATE OF 
WASHINGTON Office of the Attorney General, 800 Fifth Avenue, Suite 
2000, Seattle, Washington 98104; Plaintiffs, v. ELECTION SYSTEMS AND 
SOFTWARE, INC. 11208 John Galt Boulevard, Omaha, Nebraska 68137; 
Defendant.

COMPLAINT

    Plaintiffs, the United States of America (``United States''), 
acting under the direction of the Attorney General of the United 
States, and the States of Arizona, Colorado, Florida, Maine, Maryland, 
New Mexico, Tennessee, and Washington, and the Commonwealth of 
Massachusetts (the ``Plaintiff States''), acting under the direction of 
their respective Attorneys General, bring this civil antitrust action 
against defendant Election Systems and Software, Inc. (``ES&S''), to 
obtain a permanent injunction and other relief to remedy the harm to 
competition caused by

[[Page 12257]]

ES&S's acquisition of Premier Election Solutions, Inc. and PES 
Holdings, Inc. (collectively, ``Premier''). Plaintiffs allege as 
follows:

I. NATURE OF THE ACTION

    1. ES&S is the largest provider of voting equipment systems in the 
United States. On September 2, 2009, ES&S acquired Premier, a 
subsidiary of Diebold, Inc. (``Diebold''), then the second largest 
provider of voting equipment systems in the United States. As a result 
of that acquisition, ES&S provides more than 70 percent of the voting 
equipment systems that registered voters rely on to vote in federal, 
state and local elections held in the United States.
    2. Competition in the provision of voting equipment systems is 
critical to ensure that vendors continue to develop accurate, reliable 
and secure systems, and provide those systems to state, county and 
local election administrators at competitive prices.
    3. ES&S's acquisition of Premier combined the two largest providers 
of voting equipment systems in the United States and the two firms that 
had been, for many customers, the closest bidders for the provision of 
voting equipment systems. As a result of this transaction, prices for 
voting equipment systems likely will increase, while quality and 
innovation likely will decline, as a consequence of reduced competition 
in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  18.

II. THE DEFENDANT

    4. Defendant Election Systems and Software, Inc. (``ES&S'') is a 
Nebraska corporation with its headquarters in Omaha, Nebraska, and 
includes its successors and assigns, its subsidiaries, including 
Premier, and its divisions, groups, affiliates, partnerships and joint 
ventures, and their directors, officers, managers, agents, and 
employees. Prior to its acquisition of Premier, ES&S was already the 
largest provider of voting equipment systems in the United States, had 
systems installed in at least 41 states, and collected revenue of 
$149.4 million in 2008. Premier, now an ES&S subsidiary, was the second 
largest provider of voting equipment systems in the United States prior 
to its acquisition, had equipment installed in 33 states, and collected 
revenue of approximately $88.3 million in 2008.

III. JURISDICTION AND VENUE

    5. The United States brings this action against defendant ES&S 
under Section 15 of the Clayton Act, 15 U.S.C. Sec.  25, as amended, to 
prevent and restrain ES&S from continuing to violate Section 7 of the 
Clayton Act, 15 U.S.C. Sec.  18. Each of the Plaintiff States brings 
this action under Section 16 of the Clayton Act, 15 U.S.C. Sec.  26, to 
prevent and restrain the violation by Defendant of Section 7 of the 
Clayton Act, 15 U.S.C. Sec.  18. The Plaintiff States, by and through 
their respective Attorneys General, or other authorized officials, 
bring this action in their sovereign capacities and as parens patriae 
on behalf of the citizens, general welfare, and economy of each of 
their states.
    6. Defendant ES&S develops, sells and services voting equipment 
systems in the flow of interstate commerce. ES&S's activities in 
developing, selling and servicing voting equipment systems 
substantially affect interstate commerce. The Court has jurisdiction 
over this action and over the parties pursuant to 15 U.S.C. Sec.  25 
and 28 U.S.C. Sec. Sec.  1331 and 1337.
    7. ES&S transacts business, and has consented to venue and personal 
jurisdiction, in the District of Columbia. Venue is therefore proper in 
this District under Section 12 of the Clayton Act, 15 U.S.C. Sec.  22 
and 28 U.S.C. Sec.  1391(c).

IV. BACKGROUND

    8. In the wake of the 2000 Presidential Election, Congress enacted 
the Help America Vote Act (HAVA) to address perceived shortfalls in the 
accuracy, security and reliability of voting equipment. 42 U.S.C. 
15301-15545 (2002). HAVA authorized funding of approximately $3.86 
billion to encourage jurisdictions responsible for the administration 
of elections to replace mechanical voting devices such as lever and 
punch card machines with new electronic voting equipment systems. HAVA 
also created a new agency, the Election Assistance Commission (EAC), to 
adopt standards for and certify voting equipment systems to ensure 
their reliability and security. The EAC issued standards in 2002 and 
2005, and those standards continue to evolve. HAVA also required that 
voting equipment systems contain devices that allow disabled voters to 
cast and verify their votes privately and independently. 42 U.S.C. 
15481(a)(3)(A)-(B) (2002).
    9. State law sets the certification requirements for any voting 
equipment system installed within a state. Most states require that 
voting equipment systems or the devices that comprise those systems be 
certified, either at the federal level by the EAC, or at the state 
level according to standards set by the election authorities of that 
state. State certification regimes may be more or less rigorous than 
that of the EAC, and some states require that a vendor be certified by 
both the EAC and the state's own process. A minority of states require 
neither federal nor state certification, but describe technical 
standards for vendors responding to requests for proposal (``RFP'') for 
voting equipment systems.
    10. Voting equipment systems are purchased either by a state agency 
or by an election board or official at the county or local level. A 
jurisdiction typically goes through an extensive public procurement 
process to identify the correct system to meet its needs and determine 
its preferred vendor. Before bids are seriously considered, vendors 
often must be qualified by meeting certain financial criteria. The 
procurement process for large, complex customers can span more than a 
year, involves extensive communications between the customer and 
vendors, typically requires public demonstrations of equipment, and 
often involves third-party consultants hired by the customer. As 
vendors proceed through the procurement process, they usually become 
more familiar with the needs of the customer and the competing vendors 
under consideration. Often, customers allow a discrete group of vendors 
to proceed to a best and final round, where vendors may revise the 
terms of their bids, including price terms, before a winning bid is 
selected.
    11. Performance of voting equipment systems on Election Day is 
critical because the failure of a system, or any of the devices within 
a system, can affect the integrity of the democratic process, a failure 
that often cannot be remedied. Although certification testing of voting 
equipment systems and devices is designed to identify technical 
deficiencies, many certified devices have demonstrated security and 
accuracy problems when deployed in the field for an election. However, 
customers typically use voting equipment systems only once or twice 
every two years, so opportunities to test the reliability of equipment 
are few. As a result, an established record of successful voting 
equipment performance is of great importance to customers in evaluating 
the likely accuracy and reliability of a voting equipment system. 
Election administrators, who often are elected officials themselves, 
use successful past experience as one basis for judging the reliability 
of a voting equipment system.
    12. The significant variation of election laws and practices among 
jurisdictions results in substantial differences in customers' 
technical requirements for their voting equipment systems. A 
jurisdiction's voting equipment system needs also may be

[[Page 12258]]

based on the number of registered voters; the density of population 
within geographic boundaries; the number of polling sites; 
accommodation of the needs of disabled voters; ballot complexity, 
including legal requirements for ballot design, and the number of 
different ballot layouts, languages, and political parties; frequency 
of elections; requirements for processing absentee ballots; timing of 
reporting results; and other issues.
    13. Between 2002 and 2006, most states procured new voting 
equipment systems, exhausting their HAVA funds. Most of these 
jurisdictions anticipate that their new systems will last at least ten 
years. Given the current economic environment, many jurisdictions are 
considering attempts to extend the life of existing systems by 
investing in repair, service, and upgrades, in order to forestall the 
need to purchase new systems. However, a few states and several large 
counties anticipate purchasing a new voting equipment system in the 
next year or two. A number of other jurisdictions have relatively old 
voting equipment systems that may need to be replaced within the next 
several years.
    14. Since 2005, several jurisdictions have required that voting 
equipment systems create a paper-based record of each vote cast, out of 
concern that the electronic audit component of some devices within the 
system was insufficiently secure to guarantee the accuracy of election 
results. Vendors believe this movement has created and will continue to 
create additional demand for new voting equipment systems over the next 
few years, despite the exhaustion of HAVA funding.
V. TRADE AND COMMERCE
A. The Relevant Product Market
    15. A voting equipment system is the integrated collection of 
customized hardware, software, firmware and associated services used to 
electronically record, tabulate, transmit and report votes in an 
election. The number, variety, and operation of electronic components 
vary depending on the needs of the jurisdiction responsible for 
administering elections, which may be the state, county or local 
government, depending on state law.
    16. A voting equipment system differs from the mechanical lever and 
punch card voting devices used in the past in conjunction with manual 
tabulation methods. Mechanical systems cannot accommodate speedy 
tabulation across a large number of voters; do not allow disabled 
voters the opportunity to cast an independent, private ballot; and are 
considered less accurate and reliable than voting equipment systems.
    17. Hardware devices used to electronically record votes vary by 
recording method, and can be used for a variety of functions. These 
devices may include precinct or central count Optical Scan (``OS'') 
devices; Direct Recording Electronic (``DRE'') devices; and Ballot 
Marking Devices (``BMD''). In addition to the basic function of 
recording a vote cast on Election Day, these devices may be used to 
create a paper record of each vote, to allow independent voting by 
disabled voters, and to read votes cast by absentee or vote-by-mail 
voters. Depending on the needs of the jurisdiction, a voting equipment 
system may include only one type of device, or several different types 
of devices used in concert. All three types of recording devices feed 
votes into a tabulator, which counts each vote and prepares a report, 
with the assistance of associated software and firmware.
    18. OS devices create a paper record of each vote and are commonly 
used to read absentee ballots, but cannot provide a completely private 
and independent voting experience for any disabled voter. OS devices 
require a voter to mark an individual paper ballot, which is then 
inserted into a scanner to be electronically read. Central Count OS 
devices, particularly high-speed, digital models, are commonly used to 
read ballots submitted by absentee or vote-by-mail voters. Most OS 
devices read and record voter marks as data, though some digital 
devices capture the actual image of the ballot, to better judge the 
intent of the voter. Typically, OS devices cannot fully enable a 
disabled voter to cast a ballot independently, as assistance in marking 
the ballot and transferring it to the ballot box is required.
    19. DRE devices, sometimes referred to as touch screens, allow a 
voter to enter a vote by interfacing directly with a monitor screen, 
and some models are equipped with a device that creates a scrolling 
paper record of the votes recorded, often referred to as a Voter 
Verified Paper Trail. DRE devices allow disabled voters to cast their 
vote independently, so they often are provided exclusively for the use 
of disabled voters at polling places that may otherwise rely on OS 
equipment. DRE devices cannot be used to read ballots submitted by 
mail.
    20. BMD's require a voter to insert an individual paper ballot into 
an electronic device, and then mark that ballot using a small monitor 
interface and specialized electronic pen. BMDs are designed to 
accommodate disabled voters, allowing the independent recording of a 
vote, but pollworker assistance still is required to transfer the 
marked ballot to the ballot box. BMDs cannot be used to read ballots 
submitted by mail.
    21. The recording and tabulation devices contained within a voting 
equipment system are bound together by a collection of proprietary 
election management software and firmware. The software and firmware 
enables the operation of each device, communication between devices and 
reporting of the election results.
    22. Jurisdictions purchase voting equipment systems bundled with a 
variety of services for the initial implementation and long-term 
service and support of the system. Initial implementation services 
often include project management, equipment delivery, administrator and 
pollworker training, and warrantees on devices. Post-implementation 
services include hardware, software and firmware maintenance 
agreements, and also may include annual services such as ballot layout, 
ballot printing, Election Day help-desk support and other Election Day 
services. Typically, any service that may require changes to hardware, 
software or firmware must be performed by the original vendor, or that 
vendor's licensed representative.
    23. Jurisdictions evaluate competing bids to provide voting 
equipment systems based on compliance with state law, technical 
standards, certification standards, experience in other jurisdictions 
and commercial standards such as price, delivery schedule and other 
terms of sale. The combined technical and commercial needs of the 
customer differ for each voting equipment system bid.
    24. A small but significant increase in the price that vendors bid 
to provide voting equipment systems to customers would not cause 
customers to substitute away from electronic voting equipment systems 
so as to make such a price increase unprofitable. Accordingly, voting 
equipment systems are a line of commerce and relevant product market 
within the meaning of Section 7 of the Clayton Act.
B. Geographic Market
    25. In the United States, customers of voting equipment systems 
prefer suppliers with a substantial physical presence in the United 
States, including a network of sales, technical and support personnel 
and parts distribution.
    26. Customers prefer such vendors because, during the design, bid, 
and implementation phases of installing a

[[Page 12259]]

new voting equipment system, customers interact with vendors to test 
system functionality, adjust technical specifications, correct design 
flaws, track progress and ensure successful implementation. Further, 
customers require that vendors have a significant local service 
presence to assist annually in the preparation for Election Day, and to 
immediately address system problems arising on Election Day.
    27. A small but significant increase in the price of voting 
equipment systems would not cause a sufficient number of U.S. customers 
to turn to suppliers of voting equipment systems that do not have a 
substantial physical presence in the United States so as to make such a 
price increase unprofitable. Accordingly, the United States is a 
relevant geographic market within the meaning of Section 7 of the 
Clayton Act.
C. Anticompetitive Effects of the Acquisition
    28. ES&S's acquisition of Premier united two firms that many 
customers considered the two closest competitors in the provision of 
voting equipment systems, with the likely effects of higher prices, a 
decline in quality and innovation and changes in other key elements 
that are considered detrimental by most U.S. customers in the 
evaluation of bids to provide voting equipment systems. ES&S and 
Premier were considered the closest competitors by many customers 
because the two companies offer systems certified in the greatest 
number of jurisdictions; offer a complete suite of voting equipment 
system products; and have a reputation for reliable equipment. Having 
acquired its closest competitor, ES&S will have a reduced incentive to 
compete as aggressively for bids or to invest in new products, 
unilaterally reducing the quality and increasing the price of voting 
equipment systems available to most jurisdictions.
    29. Some customers identified ES&S and Premier as the only vendors 
qualified to meet the jurisdiction's certification requirements. For 
instance, ES&S and Premier are the only two vendors that offer EAC-
certified voting equipment systems that include an OS device and a BMD. 
Indeed, at the time of the acquisition, ES&S and Premier were the only 
active vendors that had achieved EAC-certification at all. Likewise, 
ES&S and Premier voting equipment systems are certified or approved in 
42 and 33 states, respectively; more states, by far, than any other 
vendor.
    30. Prior to the acquisition, ES&S and Premier had the unique 
ability to offer a complete suite of voting equipment choices. An array 
of devices often is important to meet the goals of providing a paper-
based system, accommodating disabled voters, and processing absentee 
ballots expeditiously. Because voting equipment systems use proprietary 
software, customers do not have the option of selecting the best in 
breed of each type of device from many vendors and integrating those 
pieces into a coherent system. A vendor that can offer a full 
complement of equipment choices within a given system often provides a 
benefit to the customer.
    31. In order to better secure voting equipment systems that have 
been tested by past experience in similar jurisdictions, many customers 
view the past experience of a vendor's equipment as a key element in 
evaluating its bid. Moreover, the more that past experience replicates 
conditions anticipated in the customer's jurisdiction, the more it 
augurs for success. ES&S and Premier are two of only three vendors 
whose voting equipment systems have been deployed in multiple statewide 
implementations. Likewise, the two companies have the broadest range of 
past experiences to call upon, making them most likely to be the 
bidders with the most experience and the most relevant experience for 
any particular bid.
    32. Only three other firms compete to provide voting equipment 
systems. None of these competitors is likely to replace the constraint 
Premier once exercised on ES&S's bidding behavior. Each of these firms 
is limited by the level of certification obtained, lack of a full 
product line, and the lack of proven equipment. At least one of these 
firms is also limited by the lack of financial ability to expand. None 
of these vendors shares the attributes that made Premier a close 
competitor to ES&S, and none is likely to substantially constrain 
ES&S's behavior in future bids.
    33. In contrast, numerous jurisdictions have benefitted from 
vigorous price competition between ES&S and Premier in the past. ES&S 
and Premier were the first and second lowest bidders for recent bids 
let by states for statewide voting equipment systems. In at least three 
recent bids for county-wide voting equipment systems, each worth 
between $1 million and $6 million, ES&S and Premier were the closest 
bidders.
    34. ES&S and Premier have been more successful than any other 
vendor in competing to meet the disparate requirements of U.S. 
customers, as evidenced by each company's portion of the installed base 
of voting equipment systems. Prior to the acquisition, ES&S was the 
incumbent provider to 47 percent of all registered voters in the United 
States, and Premier was the incumbent to 23 percent of all registered 
voters. As a result of its acquisition of Premier, ES&S became the 
incumbent for more than 70 percent of all registered voters in the 
United States.
    35. One recent state-wide procurement illustrates the closeness of 
competition between ES&S and Premier, and how that competition 
restrained ES&S's bidding behavior. The state issued a long-anticipated 
set of RFPs for procurement of a new statewide voting equipment system 
that called for the provision of a system that included OS devices that 
had been tested by an EAC-certified laboratory. As part of the scoring 
methodology, the RFPs also required that bidders identify past 
installations of voting equipment systems, and describe the scope and 
complexity of the installed jurisdiction. ES&S anticipated Premier 
would be the front runner for this opportunity. In early 2009, ES&S 
projected that Premier would low-ball the bid, and gave serious 
consideration to changing its bid price in response. Six days before 
bids were due, ES&S acquired Premier. Bids were submitted on behalf of 
both Premier and ES&S, but the state could not consider the Premier bid 
as a result of ES&S's acquisition of and changes to Premier. No other 
vendor responded to this RFP, and ES&S was approved by the state board 
overseeing the procurement in December 2009.
    36. The acquisition of Premier both ended its competitive influence 
on specific bids, and reduced ES&S's incentive to develop new products 
and upgrade existing products. In response to continuing concerns about 
the security and reliability of voting equipment systems, technical 
standards for voting equipment systems are constantly evolving. ES&S 
considered Premier the firm most responsive to these evolving 
certification standards, and elected to follow Premier's lead in the 
development of new products. For example, in the Fall of 2009, ES&S 
introduced its own digital scan high-speed OS central count device in 
response to a similar device introduced by Premier a year earlier. ES&S 
is unlikely to continue such innovation absent competition from 
Premier. Prior to its acquisition, Premier submitted an improved voting 
equipment system to certification authorities for testing in two 
states, but ES&S withdrew those applications following the acquisition. 
In the absence of competitive pressure from Premier, ES&S is unlikely 
to have the same incentive to develop new products in the future.

[[Page 12260]]

    37. ES&S's acquisition of Premier, therefore, likely will 
substantially lessen competition in the United States market for voting 
equipment systems, which likely will lead to higher prices, lower 
quality and less innovation in violation of Section 7 of the Clayton 
Act.
D. Difficulty of Entry Into the Provision of Voting Equipment Systems
    38. Successful entry into the provision of voting equipment systems 
is challenging, time-consuming, and costly. Entry requires not only the 
design and development of hardware, software and firmware products, but 
also obtaining multiple levels of certification, establishing a 
reputation for reliable performance, and financial wherewithal 
sufficient to assure a buyer of long-term service capabilities.
    39. EAC certification may cost more than $1 million for each system 
certified, and may take fifteen to twenty-four months. These costs are 
in addition to internal development costs, estimated at $2.5 to $5 
million. Previous certification attempts by established companies such 
as Premier have consumed more than $3 million and required three years. 
For at least three of the largest state jurisdictions, certification 
requires an additional investment of time and money. ES&S, for 
instance, spent approximately $4 million to become certified in one 
state. Other states may be even more rigorous, requiring that voting 
systems be certified both by the EAC and by the state.
    40. Certification alone is not sufficient for a company that does 
not have equipment with a proven record of reliable performance. One 
company recently obtained 2005 EAC-certification for its new OS device, 
after two years of product development and testing, and an investment 
of millions of dollars. Despite the time and money invested, the 
company has yet to sell a single certified device.
    41. Given the time and expense required for certification, the long 
lifecycle of voting equipment systems, the time required to demonstrate 
reliable performance of equipment, and the absence of ready capital to 
fund new investment in the voting equipment system industry, entry into 
the provision of voting equipment systems would not be timely, likely 
and sufficient to prevent an exercise of market power by ES&S.

VI. VIOLATION ALLEGED

    42. ES&S's acquisition of Premier substantially lessened 
competition in the U.S. market for voting equipment systems in 
interstate trade and commerce in violation of Section 7 of the Clayton 
Act, 15 U.S.C. Sec.  18.
    43. This acquisition has had the following anticompetitive effects, 
among others:
    a. competition between ES&S and Premier in the provision of voting 
equipment systems in the United States has been eliminated;
    b. competition generally in the provision of voting equipment 
systems in the United States has been substantially lessened; and
    c. prices will likely increase, quality will likely decrease, and 
innovation will be less likely.

VII. REQUESTED RELIEF

    44. Plaintiffs request that this Court:
    a. Adjudge and decree that the Defendant ES&S's acquisition of 
Premier violated Section 7 of the Clayton Act, 15 U.S.C. Sec.  18;
    b. Compel ES&S to divest Premier assets related to the development, 
manufacture and sale of the relevant products to enable independent and 
effective competition;
    c. Award such temporary and preliminary injunctive and ancillary 
relief as may be necessary to avert the likelihood of the dissipation 
of Premier's tangible and intangible assets during the pendency of this 
action and to preserve the possibility of effective final relief;
    d. Award the Plaintiffs the cost of this action; and
    e. Grant the Plaintiffs such other and further relief as the case 
requires and the Court deems just and proper.

    Dated: March 8, 2010.

    Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA

/s/ ------
Molly S. Boast,
Acting Assistant Attorney General.

/s/ ------
Patricia A. Brink,
Deputy Director of Operations.

/s/ ------
Maribeth Petrizzi,
Assistant Chief, Litigation II Section, D.C. Bar # 435204.

/s/ ------
Dorothy B. Fountain,
Assistant Chief, Litigation II Section, D.C. Bar #439469.

Stephanie A. Fleming, James K. Foster, Erin Carter Grace, Blake 
Rushforth,
Attorneys, U.S. Department of Justice, Antitrust Division, Litigation 
II Section, 450 Fifth Street, NW., Suite 8700, Washington, D.C. 20530, 
Tel: (202) 514-9228, Fax: (202) 514-9033, Email: 
[email protected].

CERTIFICATE OF SERVICE

    I, Stephanie Fleming, hereby certify that on March 8, 2010, I 
caused a copy of the Complaint to be served on defendant Election 
Systems and Software, Inc., by mailing the document via email to the 
duly authorized legal representative of the defendant, as follows:
FOR ELECTION SYSTEMS & SOFTWARE, INC.
Joseph G. Krauss, Hogan & Hartson LLP, 555 Thirteenth Street, NW., 
Washington, DC. 20004, (202) 637-5600, [email protected]

/s/ ------
Stephanie A. Fleming, Esq.
United States Department of Justice, Antitrust Division, Litigation II 
Section, 450 Fifth Street, NW., Suite 8700, Washington, D.C. 20530, 
(202) 514-9228, (202) 514-9033, [email protected]

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

CASE NO.:
JUDGE:
DECK TYPE: Antitrust
DATE STAMP:
    UNITED STATES OF AMERICA, et al., Plaintiffs, v. ELECTION SYSTEMS 
AND SOFTWARE, INC., Defendant.

FINAL JUDGMENT

    WHEREAS, Plaintiffs, the United States of America (``United 
States''), the States of Arizona, Colorado, Florida, Maine, Maryland, 
New Mexico, Tennessee, and Washington, and the Commonwealth of 
Massachusetts (the ``Plaintiff States''), filed their Complaint on 
March 8, 2010; Plaintiffs and Defendant, Election Systems and Software, 
Inc., by their respective attorneys, have consented to the entry of 
this Final Judgment without trial or adjudication of any issue of fact 
or law, and without this Final Judgment constituting any evidence 
against or admission by any party regarding any issue of fact or law;
    AND WHEREAS, Defendant agrees to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    AND WHEREAS, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by Defendant to restore 
competition;
    AND WHEREAS, the United States requires Defendant to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    AND WHEREAS, Defendant has represented to the United States that 
the

[[Page 12261]]

divestiture required below can and will be made and that it will later 
raise no claim of hardship or difficulty as grounds for asking the 
Court to modify any of the divestiture provisions contained below;
    NOW THEREFORE, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ORDERED, ADJUDGED AND DECREED:

I. JURISDICTION

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against Defendant under Section 7 of the Clayton 
Act, as amended (15 U.S.C. Sec.  18).

II. DEFINITIONS

    As used in this Final Judgment:
    A. ``Acquirer'' means the entity to whom Defendant divests the 
Divestiture Assets.
    B. ``ES&S'' means Defendant, Election Systems & Software, Inc., a 
Delaware corporation with its headquarters in Omaha, Nebraska, its 
successors and assigns, its subsidiaries, including Premier Election 
Solutions, Inc. and PES Holdings, Inc., both Delaware corporations 
(collectively, ``Premier''), and its divisions, groups, affiliates, 
partnerships and joint ventures, and their directors, officers, 
managers, agents, and employees.
    C. ``Premier Voting Equipment System Products'' means all versions, 
past, present, and in development, of Premier hardware, software, and 
firmware used to record, tabulate, transmit or report votes, including 
all such systems certified by federal certification authorities 
(including, but not limited to the Assure 1.2 system that was certified 
by the United States Election Assistance Commission on August 6, 2009), 
and all such systems certified by the election authorities of any 
state.
    D. ``AutoMARK Products'' means ES&S's ballot marking device that 
allows voters with disabilities to privately and independently mark a 
ballot.
    E. ``Divestiture Assets'' means:
    (1) all intangible assets related to the use, operation, 
certification, design, production, modification, enhancement, 
distribution, sale, repair or service of the Premier Voting Equipment 
System Products, including, but not limited to, intellectual property 
(including, but not limited to, patents, patent applications, licenses, 
sublicenses, copyrights, databases containing design information and, 
with respect to the Assure 1.2 suite of products only, trademarks, 
trade secrets, trade names, service marks, service names, slogans, 
domain names, logos and trade dress); the unregistered trademark 
``Premier''; data related to the use, operation, certification testing, 
internal testing, and beta testing; documentation of pending and 
current certification efforts with the United States Election 
Assistance Commission (``EAC'') and the election authorities of any 
state; technical information, software, software source code and 
related documentation, know-how, drawings, blueprints, designs, design 
tools and simulation capability, and specifications for materials, 
parts, and devices; safety procedures for the handling of materials and 
substances; quality assurance and control procedures; all manuals, 
performance, financial, operational, and other records Defendant 
provides to its own employees, customers, suppliers, agents, dealers or 
licensees; and all available research data concerning historic and 
current research and development efforts relating to the Premier Voting 
Equipment System Products, including, but not limited to, designs of 
experiments and the results of successful and unsuccessful designs and 
experiments;
    (2) tangible assets, including:
    (a) all tooling and fixed assets owned by Defendant and used in 
connection with the manufacture, assembly, production, service and 
repair of the Premier Voting Equipment System Products, as detailed in 
Section 2.7 and Schedule 2.7(a) of the Purchase Agreement by and among 
ES&S, Diebold, Inc., Premier Election Solutions, Inc., PES Holdings, 
Inc., and Premier Election Solutions Canada ULC, dated September 2, 
2009 (``Diebold Purchase Agreement'').
    (b) inventory, parts and components for both the Premier Voting 
Equipment Products and the AutoMARK Products, including those that are 
not commercially available, sufficient for the Acquirer to assemble, 
manufacture, produce, service and repair the Premier Voting Equipment 
System Products and the AutoMARK Products.
    (3) a fully paid-up, non-exclusive, perpetual, transferable license 
to certify, produce, modify, enhance, distribute, sell, repair and 
service the AutoMARK Products. Such license shall include all 
intellectual property (including, but not limited to, patents, patent 
applications, licenses, sublicenses, copyrights, trademarks, trade 
names, trade secrets, service marks, service names, slogans, domain 
names, logos, and trade dress), data, drawings, ideas, concepts, know-
how, procedures, processes, technical information, software, software 
source code and related documentation, blueprints, specifications, 
manuals, and any other intangible assets related to the use, operation, 
certification, production, modification, enhancement, distribution, 
sale, repair or service of the AutoMARK Products.

III. APPLICABILITY

    A. This Final Judgment applies to ES&S, as defined above, and all 
other persons in active concert or participation with it who receive 
actual notice of this Final Judgment by personal service or otherwise.
    B. If, prior to complying with Section IV and V of this Final 
Judgment, Defendant sells or otherwise disposes of all or substantially 
all of its assets or of lesser business units that include the 
Divestiture Assets, it shall require the purchaser to be bound by the 
provisions of this Final Judgment. Defendant need not obtain such an 
agreement from the Acquirer of the assets divested pursuant to this 
Final Judgment.

IV. DIVESTITURE

    A. Defendant is ordered and directed, within sixty (60) calendar 
days after the filing of the Complaint in this matter, or five (5) 
calendar days after notice of the entry of this Final Judgment by the 
Court, whichever is later, to divest the Divestiture Assets in a manner 
consistent with this Final Judgment to an Acquirer acceptable to the 
United States, in its sole discretion, after consultation with the 
Plaintiff States. The United States, in its sole discretion, after 
consultation with the Plaintiff States, may agree to one or more 
extensions of this time period not to exceed sixty (60) calendar days 
in total, and shall notify the Court in such circumstances. Defendant 
agrees to use its best efforts to divest the Divestiture Assets as 
expeditiously as possible.
    B. In accomplishing the divestiture ordered by this Final Judgment, 
Defendant promptly shall make known, by usual and customary means, the 
availability of the Divestiture Assets. Defendant shall inform any 
person making inquiry regarding a possible purchase of the Divestiture 
Assets that they are being divested pursuant to this Final Judgment and 
provide that person with a copy of this Final Judgment. Defendant shall 
offer to furnish to any prospective Acquirer, subject to customary 
confidentiality assurances, all information and documents relating to 
the Divestiture Assets customarily provided in a due diligence process, 
except such information or documents subject to the attorney-client 
privilege or work-product doctrine. Defendant shall make available such 
information to the

[[Page 12262]]

United States at the same time that such information is made available 
to any other person.
    C. Defendant shall provide the Acquirer and the United States 
information relating to its current and former employees involved in 
the use, operation, certification, design, production, modification, 
enhancement, distribution, sale, repair or service of the Premier 
Voting Equipment System Products and/or Premier's use of the AutoMARK 
Products to enable the Acquirer to make offers of employment to such 
personnel. Defendant shall not interfere with any negotiations by the 
Acquirer to employ any such employee whose primary responsibility is 
the use, operation, certification, design, production, modification, 
enhancement, distribution, sale, repair or service of the Premier 
Voting Equipment System Products and/or Premier's use of the AutoMARK 
Products.
    D. Defendant shall waive all nondisclosure and noncompete 
agreements for all of the current and former employees of Premier for a 
period of six (6) months following the date of the divestiture of the 
Divestiture Assets, for the exclusive purpose of allowing those 
employees to seek employment with the Acquirer.
    E. Defendant shall permit any prospective Acquirer of the 
Divestiture Assets to have reasonable access to personnel involved in 
the use, operation, certification, design, production, modification, 
enhancement, distribution, sale, repair or service of the Premier 
Voting Equipment System Products and/or the AutoMARK Products, and 
access to any and all financial, operational, or other documents and 
information customarily provided as part of a due diligence process.
    F. At the option of the Acquirer, Defendant shall enter into a 
contract for the purchase of additional parts and inventory for up to 
two (2) years sufficient to meet the Acquirer's needs to assemble, 
manufacture, produce, service or repair the Premier Voting Equipment 
System Products. The terms and conditions of any sale or contractual 
arrangement intended to satisfy this provision must be commercially 
reasonable.
    G. In addition, Defendant shall provide any Acquirer of the 
Divestiture Assets information relating to suppliers of parts and 
components used for the assembly, manufacture, production, repair or 
service of the Premier Voting Equipment System Products and the 
AutoMARK Products. Defendant shall not interfere with the Acquirer's 
ability to contract for the supply of parts or components from any 
vendor.
    H. Defendant shall immediately provide any Acquirer with a list of 
all current and former customers for the Premier Voting Equipment 
System Products.
    I. To the extent that current Premier contracts prevent Premier 
customers from selecting the Acquirer as its provider of equipment or 
services related to the Premier Voting Equipment System Products, the 
Defendant agrees to waive any such contractual impediment at the option 
of the customer.
    J. At the option of the Acquirer, Defendant shall enter into a 
transition services agreement sufficient to meet the Acquirer's needs 
for assistance in the use, operation, certification, design, 
production, modification, enhancement, distribution, sale, repair or 
service of the Premier Voting Equipment System Products and/or the 
AutoMARK Products for a period of up to six (6) months. The terms and 
conditions of any contractual arrangement intended to satisfy this 
provision must be commercially reasonable.
    K. On the date of the sale of the Divestiture Assets, Defendant 
shall provide Acquirer with copies of contracts with all current and 
former customers for any of the Premier Voting Equipment System 
Products.
    L. The Acquirer shall grant Defendant a non-exclusive license to 
use the Premier Voting Equipment System Products and the assets 
described in II(E)(2)(A), but Defendant may not use such a license to 
attempt to compete for any opportunity to sell or lease Premier Voting 
Equipment System Products contained within a Request for Proposal (or 
RFP) or a Request for Quote (or RFQ) for a voting equipment system, or 
any upgrade, request or order that calls for replacement of 50 percent 
or more of a customer's installed voting equipment, other than in the 
case of a force majeure event (i.e., Act of God, fire, earthquake, 
flood, explosion, war, or terrorist act), or to the extent the 
Defendant is obligated under a contract with a Premier or Diebold 
customer in existence at the time of Closing, or to the extent that the 
Defendant is obligated under a settlement agreement formed by Diebold 
pursuant to Section 4.2(d) of the Diebold Purchase Agreement. Subject 
to the limitations described in Section IV, Defendant may use the 
license described in this paragraph to provide equipment and services 
to current customers.
    M. Any improvement or modification to the Divestiture Assets 
developed by either Defendant or the Acquirer shall be owned solely by 
the developing party.
    N. Defendant shall not take any action that will impede in any way 
the operation or divestiture of the Divestiture Assets.
    O. Unless the United States, in its sole discretion, after 
consultation with the Plaintiff States, otherwise consents in writing, 
the divestiture pursuant to Section IV, or by trustee appointed 
pursuant to Section V, of this Final Judgment shall include the entire 
Divestiture Assets, and shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, after consultation 
with the Plaintiff States, that the Divestiture Assets can and will be 
used by the Acquirer as part of a viable, ongoing business that is 
engaged in the provision of voting equipment systems and services. The 
divestiture, whether pursuant to Section IV or Section V of this Final 
Judgment:
    (1) Shall be made to an Acquirer that, in the United State's sole 
judgment, after consultation with the Plaintiff States, has the intent 
and capability (including the necessary managerial, operational, 
technical and financial capability) of competing effectively in the 
provision of voting equipment systems and services; and
    (2) Shall be accomplished so as to satisfy the United States, in 
its sole discretion, after consultation with the Plaintiff States, that 
none of the terms of any agreement between an Acquirer and Defendant 
gives Defendant the ability unreasonably to raise the Acquirer's costs, 
to lower the Acquirer's efficiency, or otherwise to interfere in the 
ability of the Acquirer to compete effectively.

V. Appointment of Trustee

    A. If Defendant has not divested the Divestiture Assets within the 
time period specified in Section IV(A), it shall notify the United 
States of that fact in writing. Upon application of the United States, 
the Court shall appoint a trustee selected by the United States and 
approved by the Court to effect the divestiture of the Divestiture 
Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer acceptable to the United States, in its sole 
discretion, after consultation with the Plaintiff States, at such price 
and on such terms as are then obtainable upon reasonable effort by the 
trustee, subject to the provisions of Sections IV, V, and VI of this 
Final Judgment, and shall have such other powers as this Court deems 
appropriate. Subject to Section V(D) of

[[Page 12263]]

this Final Judgment, the trustee may hire at the cost and expense of 
Defendant any investment bankers, attorneys, or other agents, who shall 
be solely accountable to the trustee, reasonably necessary in the 
trustee's judgment to assist in the divestiture.
    C. Defendant shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
Defendant must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of Defendant, on 
such terms and conditions as the United States approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to Defendant and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    E. Defendant shall use its best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and Defendant 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secret or other confidential research, development, or 
commercial information. Defendant shall take no action to interfere 
with or to impede the trustee's accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States, the Plaintiff States, and the Court setting 
forth the trustee's efforts to accomplish the divestiture ordered under 
this Final Judgment. To the extent such reports contain information 
that the trustee deems confidential, such reports shall not be filed in 
the public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    G. If the trustee has not accomplished the divestiture ordered 
under this Final Judgment within six (6) months after its appointment, 
the trustee shall promptly file with the Court a report setting forth: 
(1) The trustee's efforts to accomplish the required divestiture; (2) 
the reasons, in the trustee's judgment, why the required divestiture 
has not been accomplished; and (3) the trustee's recommendations. To 
the extent such reports contain information that the trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. The trustee shall at the same time furnish such report to 
the United States and the Plaintiff States, which shall have the right 
to make additional recommendations consistent with the purpose of the 
trust. The Court thereafter shall enter such orders as it shall deem 
appropriate to carry out the purpose of the Final Judgment, which may, 
if necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by the United States.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Defendant shall notify the United States, and 
the Plaintiff States, of any proposed divestiture required by Section 
IV of this Final Judgment. Within two (2) business days following 
execution of a definitive divestiture agreement, the trustee shall 
notify the United States of any proposed divestiture required by 
Section V of this Final Judgment. The notice shall set forth the 
details of the proposed divestiture and list the name, address, and 
telephone number of each person not previously identified who offered 
or expressed an interest in or desire to acquire any ownership interest 
in the Divestiture Assets, together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States and the Plaintiff States of such notice, the United States and 
any Plaintiff State may request from Defendant, the proposed Acquirer, 
any other third party, or the trustee if applicable, additional 
information concerning the proposed divestiture, the proposed Acquirer, 
and any other potential Acquirer. Defendant and the trustee shall 
furnish any additional information requested within fifteen (15) 
calendar days of the receipt of the request, unless the parties shall 
otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from Defendant, the 
proposed Acquirer, any third party, and the trustee, whichever is 
later, the United States, in its sole discretion, after consultation 
with the Plaintiff States, shall provide written notice to Defendant 
and the trustee, if there is one, stating whether or not it objects to 
the proposed divestiture. If the United States, after consultation with 
the Plaintiff States, provides written notice that it does not object, 
the divestiture may be consummated, subject only to Defendant's limited 
right to object to the sale under Section V(C) of this Final Judgment. 
Absent written notice that the United States does not object to the 
proposed Acquirer or upon objection by the United States, a divestiture 
proposed under Section IV or Section V shall not be consummated. Upon 
objection by Defendant under Section V(C), a divestiture proposed under 
Section V shall not be consummated unless approved by the Court.

VII. FINANCING

    Defendant shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

VIII. ASSET PRESERVATION

    Until the divestiture required by this Final Judgment has been 
accomplished, Defendant shall take all steps necessary to comply with 
the Asset Preservation Stipulation and Order entered by this Court. 
Defendant shall take no action that would jeopardize the divestiture 
ordered by this Court.

IX. AFFIDAVITS

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) calendar days thereafter until 
the divestiture has been completed under Section IV or V, Defendant 
shall deliver to the United States, the Plaintiff States, an affidavit 
as to the fact and manner of its compliance with Section IV or V of 
this Final Judgment. Each such affidavit shall include the name, 
address, and telephone number of each person who, during the preceding 
thirty (30) calendar days, made an offer to acquire, expressed an 
interest in acquiring, entered into negotiations to acquire, or was 
contacted or made an inquiry about

[[Page 12264]]

acquiring, any interest in the Divestiture Assets, and shall describe 
in detail each contact with any such person during that period. Each 
such affidavit shall also include a description of the efforts 
Defendant have taken to solicit buyers for the Divestiture Assets, and 
to provide required information to prospective Acquirers, including the 
limitations, if any, on such information. Assuming the information set 
forth in the affidavit is true and complete, any objection by the 
United States, after consultation with the Plaintiff States, to 
information provided by Defendant, including limitation on information, 
shall be made within fourteen (14) calendar days of receipt of such 
affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, Defendant shall deliver to the United States an 
affidavit that describes in reasonable detail all actions it has taken 
and all steps Defendant has implemented on an ongoing basis to comply 
with Section VIII of this Final Judgment. Defendant shall deliver to 
the United States, the Plaintiff States, an affidavit describing any 
changes to the efforts and actions outlined in Defendant's earlier 
affidavits filed pursuant to this section within fifteen (15) calendar 
days after the change is implemented.
    C. Defendant shall keep all records of all efforts made to preserve 
and divest the Divestiture Assets until one year after such divestiture 
has been completed.

X. COMPLIANCE INSPECTION

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time authorized representatives of the United States 
Department of Justice Antitrust Division (``Antitrust Division''), 
including consultants and other persons retained by the United States, 
shall, upon written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to Defendant, be permitted:
    (1) Access during Defendant's office hours to inspect and copy, or 
at the option of the United States, to require Defendant to provide 
hard copy or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
Defendant, relating to any matters contained in this Final Judgment; 
and
    (2) to interview, either informally or on the record, Defendant's 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by Defendant.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendant shall submit written reports or response to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, or to the Attorneys General of any of the Plaintiff States, 
except in the course of legal proceedings to which the United States is 
a party (including grand jury proceedings), or for the purpose of 
securing compliance with this Final Judgment, or as otherwise required 
by law.
    D. If at the time information or documents are furnished by 
Defendant to the United States, Defendant represents and identifies in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure, and Defendant marks each pertinent 
page of such material, ``Subject to claim of protection under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United 
States shall give Defendant ten (10) calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

XI. NOTIFICATION

    Unless such transaction is otherwise subject to the reporting and 
waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. Sec.  18a (the ``HSR 
Act''), Defendant, without providing advance notification to the 
Antitrust Division, the Plaintiff States, shall not directly or 
indirectly acquire any assets of or any interest (including, but not 
limited to, any financial, security, loan, equity, or management 
interest) in any entity engaged in the provision of voting equipment 
systems and services in the United States during the term of this Final 
Judgment.
    Such notification shall be provided to the Antitrust Division, the 
Plaintiff States, in the same format as, and per the instructions 
relating to the Notification and Report Form set forth in the Appendix 
to Part 803 of Title 16 of the Code of Federal Regulations as amended, 
except that the information requested in Items 5 through 9 of the 
instructions must be provided only about voting equipment systems and 
services. Notification shall be provided at least thirty (30) calendar 
days prior to acquiring any such interest, and shall include, beyond 
what may be required by the applicable instructions, the names of the 
principal representatives of the parties to the agreement who 
negotiated the agreement, and any management or strategic plans 
discussing the proposed transaction. If, within the 30-day period after 
notification, representatives of the Antitrust Division make a written 
request for additional information, Defendant shall not consummate the 
proposed transaction or agreement until thirty (30) calendar days after 
submitting all such additional information. Early termination of the 
waiting periods in this paragraph may be requested and, where 
appropriate, granted in the same manner as is applicable under the 
requirements and provisions of the HSR Act and rules promulgated 
thereunder. This Section shall be broadly construed and any ambiguity 
or uncertainty regarding the filing of notice under this Section shall 
be resolved in favor of filing notice.

XII. NO REACQUISITION

    Defendant may not reacquire any part of the Divestiture Assets 
during the term of this Final Judgment.

XIII. RETENTION OF JURISDICTION

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIV. EXPIRATION OF FINAL JUDGMENT

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XV. PUBLIC INTEREST DETERMINATION

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16, including making copies available to 
the public of this Final Judgment, the Competitive Impact Statement, 
and any comments thereon

[[Page 12265]]

and the United States's responses to comments. Based upon the record 
before the Court, which includes the Competitive Impact Statement and 
any comments and responses to comments filed with the Court, entry of 
this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16
-----------------------------------------------------------------------
United States District Judge

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

CASE: 1:10-cv-00380
Assigned To: Bates, John D.
Assign Date: 3/8/2010
Description: Antitrust
    UNITED STATES OF AMERICA, et al., Plaintiffs, v. ELECTION SYSTEMS & 
SOFTWARE, Inc., Defendant.

COMPETITIVE IMPACT STATEMENT

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. Sec.  16(b)-(h), files this Competitive 
Impact Statement relating to the proposed Final Judgment submitted for 
entry in this civil antitrust proceeding.

I. NATURE AND PURPOSE OF THE PROCEEDING

    Defendant Election Systems and Software, Inc. (``ES&S'') executed a 
Purchase Agreement on September 2, 2009, pursuant to which ES&S agreed 
to acquire Premier Election Solutions, Inc. and PES Holdings, Inc. 
(collectively, ``Premier''), and other subsidiaries of Diebold, Inc 
(``Diebold''). ES&S's acquisition of Premier was consummated on the 
same day. Since the acquisition, Premier no longer functions as an 
independent subsidiary, but has been integrated into ES&S's corporate 
structure.
    The United States and the States of Arizona, Colorado, Florida, 
Maine, Maryland, New Mexico, Tennessee, and Washington, and the 
Commonwealth of Massachusetts (the ``Plaintiff States''), filed a civil 
antitrust Complaint on March 8, 2010, seeking injunctive and other 
relief to remedy the likely anticompetitive effects arising from ES&S's 
acquisition of Premier. The Complaint alleged that the acquisition 
combined the two largest providers of voting equipment systems in the 
United States, and the two firms that had been, for many customers, the 
closest bidders for the provision of voting equipment systems. This 
combination resulted in a substantial reduction in competition for the 
provision of voting equipment systems in the United States, in 
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  18. The loss 
of Premier as an independent competitor likely would result in higher 
prices, a reduction in quality, and less innovation in the U.S. voting 
equipment systems market.
    At the same time the Complaint was filed, the United States filed 
an Asset Preservation Stipulation and Order (``APSO'') and proposed 
Final Judgment, which are designed to eliminate the anticompetitive 
effects of ES&S's consummated acquisition of Premier. Under the 
proposed Final Judgment, which is explained more fully below, ES&S is 
required to divest all of the assets needed for an acquirer to compete 
to provide voting equipment systems, including the intellectual 
property related to the Premier voting equipment systems that it 
purchased from Diebold; the tooling and fixed assets used to 
manufacture those systems; and existing inventory and parts related to 
the Premier voting equipment systems (collectively, ``Divestiture 
Assets''). In addition, ES&S is required to divest a fully paid-up, 
non-exclusive, irrevocable license to ES&S's AutoMARK products. Under 
the proposed Final Judgment, only the Acquirer may offer Premier 
systems to compete for a new voting equipment system procurement, 
including orders that would require replacement of more than fifty 
percent of an installed system. To facilitate the Acquirer's ability to 
service the existing installations of Premier voting equipment systems, 
the proposed Final Judgment also requires that ES&S waive all non-
competition agreements for employees and waive any contractual terms 
that would otherwise prevent customers from selecting the Acquirer as 
their voting equipment system service provider. ES&S must also provide 
transition services to the Acquirer. Under the terms of the APSO, ES&S 
will take certain steps to ensure that the Divestiture Assets are 
preserved in their current condition and segregated from ES&S.
    The United States and ES&S have stipulated that the proposed Final 
Judgment may be entered after compliance with the APPA. Entry of the 
proposed Final Judgment would terminate this action, except that the 
Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the Final Judgment until the divestiture is consummated 
and to punish violations thereof.

II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATIONS

A. The Defendant
    Election Systems and Software, Inc. is the largest provider of 
voting equipment systems in the United States. Prior to its acquisition 
of Premier, ES&S provided 47 percent of installed systems, in at least 
41 states, and collected revenue of $149.4 million in 2008. Premier, 
now an ES&S subsidiary, was the second largest provider of voting 
equipment systems in the United States prior to its acquisition, with 
approximately 23 percent of all installed systems in 33 states, and 
collected revenue of approximately $88.3 million in 2008. On September 
2, 2009, ES&S acquired Premier and other Diebold Inc., subsidiaries, 
for $5 million in cash, and 70 percent of certain receivables.\1\
---------------------------------------------------------------------------

    \1\ Because the purchase price for this transaction fell below 
the reporting thresholds of the Hart-Scott-Rodino (``HSR'') 
Antitrust Improvements Act of 1976, ES&S was not required to report 
the acquisition to the Department of Justice or the Federal Trade 
Commission before consummation. See 15 U.S.C. Sec.  18a(a)(2)(B)(i) 
(2000); 75 Fed. Reg. 3468 (Jan. 21, 2010).
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B. The Competitive Effects of the Acquisition on the U.S. Market for 
Voting Equipment Systems
1. Relevant Markets
    Since the 2002 implementation of the Help America Vote Act 
(``HAVA''), 42 U.S.C. 15301-15545, most Americans rely on voting 
equipment systems to electronically cast their votes in local, state 
and federal elections. HAVA authorized funding for voting equipment 
systems to replace mechanical voting devices, such as lever and punch 
card machines, and established a new federal certification agency, the 
Election Assistance Commission (EAC), in order to ensure the accuracy, 
security and reliability of the voting process. Id. The EAC issued 
standards for voting equipment systems in 2002 and 2005, and those 
standards are continually evolving. HAVA also required that the voting 
equipment systems provide disabled voters the opportunity to cast a 
private and independent ballot. 42 U.S.C. 15481(a)(3)(A)-(B) (2002).
    A voting equipment system consists of the integrated collection of 
customized hardware, software, firmware and associated services used to 
electronically record, tabulate, transmit and report votes in an 
election. Hardware components may include recording devices such as 
precinct or central count Optical Scan (``OS'') machines; Direct 
Recording Electronic

[[Page 12266]]

(``DRE'') machines; and Ballot Marking Devices (``BMD''). Recording 
devices may be used not only to cast votes, but also to create a paper 
record of each vote, to allow independent voting by disabled voters, 
and to read votes cast by absentee or vote-by-mail voters. Depending on 
the needs of the jurisdiction, a voting equipment system may include 
only one type of device, or several different types of devices used in 
concert. Each type of recording device feeds votes into a tabulator, 
which counts each vote and prepares a report. All devices are bound 
together by a collection of proprietary election management software 
and firmware, which enables their operation and the communication and 
reporting of election results.
    The number, variety, and operation of electronic components within 
a voting equipment system vary depending on the needs of the 
jurisdiction responsible for administering elections, which may be the 
state, county or local government, depending on state law. Voting 
equipment systems typically are sold to state, county and municipal 
jurisdictions, pursuant to request for proposals. The jurisdictions 
typically evaluate competing bids using a public procurement process 
and select a winning bid based on its compliance with state law, 
technical standards, certification standards, experience in other 
jurisdictions and commercial terms, such as price, delivery schedule 
and other conditions of sale. The combined technical and commercial 
needs vary among customers. Most successful bids also include multi-
year service agreements.
    A voting equipment system differs from the mechanical lever and 
punch card voting devices used in the past in conjunction with manual 
tabulation methods. Mechanical systems cannot accommodate speedy 
tabulation across a large number of voters; do not allow disabled 
voters the opportunity to cast an independent, private ballot; and are 
considered less accurate and reliable than voting equipment systems.
    A small but significant increase in the price that vendors bid to 
provide voting equipment systems to customers would not cause customers 
to substitute away from electronic voting equipment systems so as to 
make such a price increase unprofitable. Accordingly, the Plaintiffs 
allege that voting equipment systems are a relevant product market 
within the meaning of Section 7 of the Clayton Act.
    In the United States, customers of voting equipment systems prefer 
suppliers with a substantial physical presence in the United States, 
including a network of sales, technical and support personnel and parts 
distribution. Customers prefer such vendors because, during the design, 
bid, and implementation phases of installing a new voting equipment 
system, customers interact with vendors to test system functionality, 
adjust technical specifications, correct design flaws, track progress 
and ensure successful implementation. A significant local service 
presence also is required to assist annually in the preparation for 
Election Day, and to address immediately system problems arising on 
Election Day.
    A small but significant increase in the price of voting equipment 
systems in the United States would not cause a sufficient number of 
U.S. customers to turn to suppliers of voting equipment systems that do 
not have a substantial physical presence in the United States so as to 
make such a price increase unprofitable. Accordingly, the Plaintiffs 
allege that the United States is a relevant geographic market within 
the meaning of Section 7 of the Clayton Act.
2. Anticompetitive Effects
    ES&S's acquisition of Premier combined two firms that many 
customers considered the two closest competitors in the provision of 
voting equipment systems, and the two largest providers of U.S. voting 
equipment systems, substantially reducing competition for the provision 
of voting equipment systems in the United States. As a result of ES&S's 
acquisition of its closest competitor, ES&S has a reduced incentive 
both to compete as aggressively for bids and to invest in new products, 
thereby increasing the price and reducing the quality of the voting 
equipment systems available to most jurisdictions.
    Prior to the acquisition, ES&S and Premier were considered the 
closest competitors by many customers because the two companies offered 
voting equipment systems certified in the greatest number of 
jurisdictions; offered a complete suite of voting equipment system 
products; had a reputation for reliable equipment; and enjoyed an 
incumbent vendor's expertise on election administration in several 
jurisdictions. ES&S and Premier were certified in more states by far 
than any other vendor, and were the only two active vendors with EAC 
certification at the time of the acquisition. Prior to the acquisition, 
ES&S and Premier also offered two of the most complete suites of voting 
equipment choices, an important factor for many jurisdictions because 
proprietary election management software prevents customers from 
selecting the best in breed of each type of device. Further, ES&S and 
Premier voting equipment systems had the broadest installed bases prior 
to the acquisition, which helped assure customers that the systems were 
proven by experience in the field. A proven voting equipment system is 
an important consideration for many customers because, although 
certification testing is designed to screen out technical problems, 
even certified machines have demonstrated security and accuracy 
problems when deployed in an actual election, which can undermine the 
integrity of the democratic process. In addition to supplying customers 
with proven equipment, ES&S and Premier employees provided a variety of 
valuable services to their customers, which gave the companies greater 
familiarity with the needs of each customer, and a resulting advantage 
in competing to sell each customer a new installation in the future.
    A number of recent bid events substantiate the close competition 
between ES&S and Premier prior to the acquisition, and demonstrate that 
ES&S has responded to Premier's competition by reducing its own prices 
and offering other favorable terms. ES&S's acquisition of Premier 
eliminated ES&S's strongest competitor and, as a result, has given ES&S 
both the incentive and ability to profitably raise its bid prices 
significantly above the level they would be absent the acquisition. The 
remaining three competitors, limited by the lack of a full product 
line, inadequate certification, a limited record of proven equipment 
and, in at least one case, lack of financing, cannot fully constrain a 
unilateral exercise of market power by ES&S.
    The acquisition of Premier also reduces ES&S's incentive to develop 
new, more accurate, and more secure voting equipment system products. 
In the past, ES&S has responded to Premier's efforts to meet new 
standards by following Premier's lead in the development of new 
products. The acquisition removes the firms' competitive pressure on 
each other to innovate, and is likely to reduce the quality and variety 
of new products brought to the market, reducing the choices offered to 
customers. Since its acquisition of Premier, ES&S has already withdrawn 
Premier products from certification testing in two states. In the 
absence of competitive pressure from Premier, ES&S is unlikely to have 
the same incentive to develop new products in the future.

[[Page 12267]]

    Finally, entry or expansion by any other firm into the U.S. market 
for the provision of voting equipment systems is unlikely to prevent 
the substantial lessening of competition resulting from ES&S's 
acquisition of Premier. Firms attempting to enter into the development, 
production, and sale of voting equipment systems in the United States 
face several barriers that make successful entry challenging, time-
consuming, and costly. Entry requires not only the design and 
development of hardware, software and firmware products, but also 
obtaining multiple levels of certification, establishing a reputation 
for reliable equipment performance, and the financial wherewithal 
sufficient to assure a buyer of long-term service capabilities. The 
design and development of technology requires a considerable, risky 
capital investment over a period of several years. Most jurisdictions 
also require that vendors obtain federal and/or state certification, 
which can cost millions and take multiple years to complete. In 
addition, firms must establish a reputation for reliable system 
performance. As most voting equipment systems are used only once or 
twice every two years, establishing a reputation for reliable system 
operation takes several years of successful performance. Finally, 
providers of voting equipment systems must demonstrate both that they 
are financially sound and that they will respond quickly and 
effectively to requests for service or parts for many years after a new 
voting equipment system has been installed.
    Therefore, ES&S's completed acquisition of Premier likely will 
substantially lessen competition in the United States market for voting 
equipment systems, which likely will lead to higher prices, lower 
quality and less innovation in violation of Section 7 of the Clayton 
Act.
III. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT
    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendant. The 
United States could have continued the litigation and sought a 
permanent injunction requiring that ES&S divest the Premier assets and 
voting securities. However, the acquisition of Premier by ES&S was 
consummated before the United States learned of the transaction and 
could commence an investigation. Given the diminution of the Premier 
assets since ES&S acquired the company, relief that replicates the 
condition of Premier prior to the acquisition is not available. Premier 
operated as an independent subsidiary of Diebold prior to the 
acquisition. After ES&S acquired the company, it dismantled the 
business units necessary for independent operation, subsuming Premier 
operations into the ES&S corporate structure. Less than a month after 
the acquisition, the Premier business units responsible for sales, 
product design and development, and voting equipment system 
certification all were dismantled, and most employees of these business 
units were terminated. While ES&S continues to serve current Premier 
customers, it does so with the assistance of ES&S resources, staffing 
and operations. Consequently, unwinding the transaction to require a 
divestiture of only Premier voting securities and remaining assets 
would not be sufficient to restore the Premier entity that existed 
prior to ES&S's acquisition of the company.
    Further, the litigation process would likely take considerable 
time. The Premier assets likely would diminish substantially during the 
pendency of litigation, particularly as preliminary relief is not 
available to compel ES&S to invest in ongoing research, development and 
certification of future Premier voting equipment systems. Even if a 
court ultimately ordered a divestiture, the delay would diminish, if 
not forestall, the competitive value of the Premier assets in the hands 
of a divestiture buyer because the standards for voting equipment 
systems would have evolved away from Premier's current line of 
products. The United States is satisfied that the proposed Final 
Judgment has allowed the government to secure relief more quickly than 
if the matter had gone to litigation, and that the divestiture of the 
assets described in the proposed Final Judgment will preserve 
competition for the provision of voting equipment systems in the United 
States. Thus, the proposed Final Judgment will achieve all or 
substantially all of the relief the United States would have obtained 
through litigation, but avoids the time, expense, and uncertainty of a 
full trial on the merits of the Complaint.
IV. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
    The divestiture required by the proposed Final Judgment will 
eliminate the anticompetitive effects that would otherwise likely 
result from ES&S's acquisition of Premier. The divestiture will restore 
competition by making available to an independent competitor the 
Premier assets necessary to equip an economically viable competitor to 
ES&S in the provision of voting equipment systems in the United States.
    The proposed Final Judgment requires ES&S to take certain actions, 
including divesting, within sixty (60) days after the filing of the 
Complaint, or five (5) days after notice of the entry of the Final 
Judgment by the Court, whichever is later, the following assets: (1) 
all of the intangible assets related to past and present Premier voting 
equipment system products, as well as those that were in development at 
the time of the acquisition; (2) tangible assets including all tooling 
and fixed assets related to the production, assembly and repair of 
those products; and (3) inventory and parts sufficient to meet the 
needs of the Acquirer.
    In addition to these divestitures, the proposed Final Judgment also 
requires ES&S to grant a fully paid-up, non-exclusive, irrevocable 
license to ES&S's AutoMARK products. The AutoMARK products are Ballot 
Marking Devices (``BMD''), used in some jurisdictions to allow some 
disabled voters the opportunity to cast a private and independent 
ballot. Prior to the acquisition, Premier used a limited, non-exclusive 
license from ES&S to offer AutoMARK products as part of its EAC-
certified Assure 1.2 system. To allow customers the greatest number of 
choices of systems that include an EAC-certified BMD, ES&S must provide 
the Acquirer with a license to use, service, repair, modify and improve 
the AutoMARK products.
    In order to facilitate the Acquirer's ability to provide services 
related to voting equipment systems to existing Premier customers, the 
proposed Final Judgement also requires that ES&S waive all non-
competition and non-disclosure agreements for all current and former 
Premier employees. Access to Premier employees will allow the Acquirer 
to recruit employees with experience serving current customers, and 
expertise related to the development, sale, repair or service of 
Premier voting equipment system products. Allowing such recruitment 
will enable the Acquirer to re-establish the experience and expertise 
of Premier before its acquisition by ES&S, and so will facilitate its 
ability to restore competition in the sale of voting equipment systems. 
In addition to waiving all non-competition and non-disclosure 
agreements, ES&S is prohibited from interfering with the Acquirer's 
efforts to recruit Premier employees. The waiver is limited to six 
months, in order to encourage the Acquirer to solicit staff 
expeditiously, and minimize the disruption to upcoming elections that 
otherwise

[[Page 12268]]

might result from significant staff turnover.
    Under the terms of the proposed Final Judgment, only the Acquirer 
will be permitted to offer Premier voting equipment systems to existing 
customers for new installations. New installations of voting equipment 
systems are defined broadly to capture any procurement let under a 
Request for Proposal or Request for Quote, as well as any procurement 
that calls for replacement of 50 percent or more of a customer's 
installed equipment. By providing the Acquirer with the exclusive right 
to offer the Premier voting equipment systems to customers for new 
installations, the remedy replicates the incentive that Premier would 
have had, giving the Acquirer the greatest incentive to invest in the 
development of new Premier products.
    The proposed Final Judgment also provides for the creation of new 
competition in the provision of services related to voting equipment 
systems, in order to permit the Acquirer to replace the competition in 
the sale of voting equipment systems that was lost as a result of 
ES&S's acquisition of Premier. Currently, only one vendor typically is 
able to provide certain services to a voting equipment system customer, 
as these services are linked to the proprietary election management 
software that a particular vendor provides. The proposed Final 
Judgment, however, will allow both the Acquirer and ES&S to compete to 
provide all services related to Premier voting equipment systems, 
giving customers the option to switch to the Acquirer or to remain with 
ES&S for service of their existing Premier voting equipment systems. 
ES&S is required to waive any contractual provisions that otherwise 
would prevent or hinder the Acquirer from competing to provide services 
to current Premier customers. The potential to serve current customers 
enhances competition in the sale of voting equipment systems by 
enabling the Acquirer to develop expertise about a customer's election 
administration needs and practices. These provisions further enhance 
the divestiture's efficacy by ensuring that ES&S does not retain sole 
control over the quality and extent of service on the installed base of 
Premier equipment, and would not be able to use its provision of 
service to undermine the competitive goals of the divestiture. Leaving 
the ultimate choice of service providers to customers accommodates 
customer concerns that an outright divestiture of customer service 
contracts would disrupt the administration of upcoming primaries and 
elections.
    In addition, the proposed Final Judgment requires that ES&S provide 
a transition services agreement and a transitional supply agreement for 
parts and inventory. The transition services agreement must be 
sufficient to meet the Acquirer's needs for assistance in matters 
relating to the utilization of the divestiture assets for a period of 
up to six months. ES&S also must agree to supply parts and inventory to 
the Acquirer at commercially reasonable terms for up to two years, in 
order to allow the Acquirer access to parts and inventory while it 
arranges for independent manufacturing. ES&S also must not interfere 
with the Acquirer's efforts to contract with third party manufacturers, 
on whom vendors typically rely for the manufacture of parts and 
assembly of finished devices.
    The divestiture must be accomplished in such a way as to satisfy 
the United States in its sole discretion, after consultation with the 
Plaintiff States, that these assets can and will be operated by the 
Acquirer as a viable, ongoing business that will compete effectively in 
the development, production, sale, repair, and service of voting 
equipment systems in the United States. ES&S must take all reasonable 
steps necessary to accomplish the divestiture quickly and shall 
cooperate with prospective purchasers.
    In the event that ES&S does not accomplish the divestiture within 
the periods prescribed in the proposed Final Judgment, the Final 
Judgment provides that the Court will appoint a trustee selected by the 
United States to effect the divestiture. If a trustee is appointed, the 
proposed Final Judgment provides that ES&S will pay all costs and 
expenses of the trustee. The trustee's commission will be structured so 
as to provide an incentive for the trustee based on the price and terms 
obtained and the speed with which the divestiture is accomplished. 
After his or her appointment becomes effective, the trustee will file 
monthly reports with the Court and the United States setting forth his 
or her efforts to accomplish the divestiture. At the end of six (6) 
months, if the divestiture has not been accomplished, the trustee and 
the United States will make recommendations to the Court, which shall 
enter such orders as appropriate, in order to carry out the purpose of 
the trust, including extending the trust or the term of the trustee's 
appointment.
    The divestiture and other provisions of the proposed Final Judgment 
will eliminate the anticompetitive effects that likely would result 
from ES&S's acquisition of Premier.
V. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
    Section 4 of the Clayton Act, 15 U.S.C. Sec.  15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
Sec.  16(a), the proposed Final Judgment has no prima facie effect in 
any subsequent private lawsuit that may be brought against Defendant.
VI. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL 
JUDGMENT
    The United States and Defendant have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. The comments and the 
response of the United States will be filed with the Court and 
published in the Federal Register. Written comments should be submitted 
to:

Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, 
United States Department of Justice, 450 Fifth Street, N.W., Suite 
8700, Washington, D.C. 20530.

    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action and the parties may apply to the Court 
for any order necessary or appropriate for the

[[Page 12269]]

modification, interpretation, or enforcement of the Final Judgment.
VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT
    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. Sec.  16(e)(1). In making that 
determination in accordance with the statute, the court is required to 
consider:
    (A) the competitive impact of such judgment, including termination 
of alleged violations, provisions for enforcement and modification, 
duration of relief sought, anticipated effects of alternative remedies 
actually considered, whether its terms are ambiguous, and any other 
competitive considerations bearing upon the adequacy of such judgment 
that the court deems necessary to a determination of whether the 
consent judgment is in the public interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and individuals 
alleging specific injury from the violations set forth in the complaint 
including consideration of the public benefit, if any, to be derived 
from a determination of the issues at trial.

15 U.S.C. Sec.  16(e)(1)(A)-(B). In considering these statutory 
factors, the court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States v. 
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally 
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) 
(assessing public interest standard under the Tunney Act); United 
States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ]76,736, 2009 U.S. 
Dist. LEXIS 84787, No. 08-1965 (JR), at *3 (D.D.C. Aug. 11, 2009) 
(noting that the court's review of a consent judgment is limited and 
only inquires ``into whether the government's determination that the 
proposed remedies will cure the antitrust violations alleged in the 
complaint was reasonable, and whether the mechanism to enforce the 
final judgment are clear and manageable.'').
    As the United States Court of Appeals for the District of Columbia 
has held, under the APPA a court considers, among other things, the 
relationship between the remedy secured and the specific allegations 
set forth in the government's complaint, whether the decree is 
sufficiently clear, whether enforcement mechanisms are sufficient, and 
whether the decree may positively harm third parties. See Microsoft, 56 
F.3d at 1458-62. With respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS, Inc., 
858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d 
at 1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 
(D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have 
held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\2\ In 
determining whether a proposed settlement is in the public interest, 
the court ``must accord deference to the government's predictions about 
the efficacy of its remedies, and may not require that the remedies 
perfectly match the alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d 
at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts 
to be ``deferential to the government's predictions as to the effect of 
the proposed remedies''); United States v. Archer-Daniels-Midland Co., 
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant 
due respect to the United States's prediction as to the effect of 
proposed remedies, its perception of the market structure, and its 
views of the nature of the case).
---------------------------------------------------------------------------

    \2\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' '').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is `within the 
reaches of public interest.' '' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). Therefore, the United States ``need only 
provide a factual basis for concluding that the settlements are 
reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 489 
F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also InBev, 2009 
U.S. Dist. LEXIS 84787, at *20 (``the `public interest' is not to be 
measured by comparing the violations alleged in the complaint against 
those the court believes could have, or even should have, been 
alleged''). Because the ``court's authority to review the decree 
depends entirely on the government's exercising its prosecutorial 
discretion by bringing a case in the first place,'' it follows that 
``the court is only authorized to review the decree itself,'' and not 
to ``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60. 
As this Court confirmed in SBC Communications, courts ``cannot look 
beyond the complaint in making the public interest determination unless 
the complaint is drafted so narrowly as to make a mockery of judicial 
power.'' 489 F. Supp. 2d at 15.
    In its 2004 amendments to the Tunney Act,\3\ Congress made clear 
its

[[Page 12270]]

intent to preserve the practical benefits of utilizing consent decrees 
in antitrust enforcement, stating: ``[n]othing in this section shall be 
construed to require the court to conduct an evidentiary hearing or to 
require the court to permit anyone to intervene.'' 15 U.S.C. Sec.  
16(e)(2). The language wrote into the statute what Congress intended 
when it enacted the Tunney Act in 1974, as Senator Tunney explained: 
``[t]he court is nowhere compelled to go to trial or to engage in 
extended proceedings which might have the effect of vitiating the 
benefits of prompt and less costly settlement through the consent 
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Senator 
Tunney). Rather, the procedure for the public interest determination is 
left to the discretion of the court, with the recognition that the 
court's ``scope of review remains sharply proscribed by precedent and 
the nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d 
at 11.\4\
---------------------------------------------------------------------------

    \3\ The 2004 amendments substituted the word ``shall'' for 
``may'' when directing the courts to consider the enumerated factors 
and amended the list of factors to focus on competitive 
considerations and address potentially ambiguous judgment terms. 
Compare 15 U.S.C. Sec.  16(e) (2004), with 15 U.S.C. Sec.  16(e)(1) 
(2006); see also SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding 
that the 2004 amendments ``effected minimal changes'' to Tunney Act 
review).
    \4\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.DC 2000) (noting that the ``Tunney Act expressly allows the court 
to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt 
failure of the government to discharge its duty, the Court, in 
making its public interest finding, should * * * carefully consider 
the explanations of the government in the competitive impact 
statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
---------------------------------------------------------------------------

VIII. DETERMINATIVE DOCUMENTS
    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

    Dated: March 8, 2010

    Respectfully submitted,

------/s/------

Stephanie A. Fleming, Esq.

United States Department of Justice, Antitrust Division, Litigation II 
Section, 450 Fifth Street, NW., Suite 8700, Washington, D.C. 20530, 
(202) 514-9228, (202) 514-9033, [email protected]

CERTIFICATE OF SERVICE

    I, Stephanie A. Fleming, hereby certify that on March 8, 2010, I 
caused a copy of the foregoing Competitive Impact Statement to be 
served upon Defendant Election Systems and Software, Inc. and the 
Plaintiff States by mailing the documents electronically to their duly 
authorized legal representatives as follows:

FOR DEFENDANT, ELECTION SYSTEMS & SOFTWARE, INC.
Joseph G. Krauss, Esq., Hogan & Hartson, LLP, 555 Thirteenth Street, 
NW., Washington, DC 20004, (202) 637-5832, [email protected]
FOR PLAINTIFF STATE OF ARIZONA
Nancy M. Bonnell, Antitrust Unit Chief, Consumer Protection & Advocacy 
Section, 1275 West Washington, Phoenix, AZ 85007, Tel: (602) 542-7728, 
Fax: (602) 542-9088, Email: [email protected]
FOR PLAINTIFF STATE OF COLORADO
Devin Laiho, Assistant Attorney General, Antitrust Enforcement, Office 
of the Attorney General, 1525 Sherman St., Seventh Floor, Denver, 
Colorado 80203, Tel: (303) 866-5079, [email protected]
FOR PLAINTIFF STATE OF FLORIDA
Russell S. Kent, Special Counsel for Litigation, Office of the Attorney 
General, PL-01; The Capitol, Tallahassee, FL 32399, Tel: (850) 414-
3300, Fax: (850) 488-9134, Email: [email protected]
FOR PLAINTIFF STATE OF MAINE
Christina M. Moylan, Assistant Attorney General, 6 State House Station, 
Augusta, ME 04333, Tel: (207) 626-8838, Fax: (207) 624-7730, Email: 
[email protected]
FOR PLAINTIFF STATE OF MARYLAND
Ellen S. Cooper, Assistant Attorney General, Chief, Antitrust Division, 
200 St. Paul Place, 19th Floor, Baltimore, MD 21202, Tel: (410) 576-
6470, Fax: (410) 576-7830, Email: [email protected]
FOR PLAINTIFF COMMONWEALTH OF MASSACHUSETTS
Matthew M. Lyons, Assistant Attorney General, Office of Attorney 
General Martha Coakley, One Ashburton Place, Boston, MA 02108, Tel: 
(617) 727-2200, Fax: (617) 727-5765, Email: [email protected]
FOR PLAINTIFF STATE OF NEW MEXICO
Deyonna Young, Assistant Attorney General, Office of the Attorney 
General of New Mexico, 111 Lomas Blvd., NW., Suite 300, Albuquerque, NM 
87102, Tel: (505) 222-9089, Fax: (505) 222-9086, Email: [email protected]gov
FOR PLAINTIFF STATE OF TENNESSEE
Victor J. Domen, Jr., Senior Counsel, Office of the Tennessee Attorney 
General, Consumer Advocate and Protection Division, 425 Fifth Avenue 
North, Nashville, TN 37243, Tel: (615) 532-5732, Fax: (615) 532-2910, 
Email: [email protected]
FOR PLAINTIFF STATE OF WASHINGTON
David Kerwin, Assistant Attorney General, Washington State Attorney 
General's Office, 800 Fifth Avenue, Suite 2000, Seattle, WA 98104, Tel: 
(206) 464-7030, Fax: (206) 464-6338, Email: [email protected]
------/s/------

Stephanie A. Fleming, Esq.

United States Department of Justice, Antitrust Division, Litigation II 
Section, 450 Fifth Street, NW., Suite 8700, Washington, D.C. 20530, 
(202) 514-9228, (202) 514-9033, [email protected]

[FR Doc. 2010-5519 Filed 3-12-10; 8:45 am]
BILLING CODE 4410-11-P