When Election Systems and Software (ES&S) announced that it was purchasing Premier Election Solutions (Premier) from Diebold, no one seemed particularly surprised by the announcement.

“I have been in this industry for 13 years, so nothing surprises me. Honestly, that was my reaction,” said Michelle M. Schafer, vice president of communications and external affairs for Sequoia Voting Systems.

Should the sale go through, ES&S will be purchasing Premier for a reported $5 million in cash, plus payments representing 70 percent of any cash collected on outstanding accounts receivable as of August 31.

Diebold, Inc. purchased Global Election Systems for about $31 million in January 2002 and since then has endured numerous lawsuits and problems with requirements that varied by state. According to published reports, Diebold has been looking to sell its elections division since early 2006.

ES&S is the largest election system company in the U.S. and serves 1,985 jurisdictions in more than 43 states with approximately 67 million registered voters (45 percent of the voting precincts). Premier Solutions controls 23 percent of U.S. voting precincts. The other three remaining major vendors are Sequoia Voting Systems (18 percent), Hart InterCivic (9 percent), and Canadian-based Dominion Voting Systems, Inc. (5 percent).

Doug Lewis, executive director of the Election Center, notes that due to the nature of the elections industry, no one should be surprised when a company goes out of business or chooses to be purchased.

He noted that the Help America Vote Act of 2002, created an almost unrealistic market for voting machines that now with a few exceptions, has changed because most jurisdictions are no longer purchasing new voting equipment or can afford to purchase new equipment.

“Economic reality is economic reality when you get right down to it and there’s going to be consolidation in this industry and this is probably just the beginning,” Lewis said.

Still, despite the lack of surprise, the reactions to the potential sale were fast, furious and varied. Champagne County, Ill. Clerk Mark Shelden voiced his support on his blog, saying that, “ES&S is an excellent company. I’m confident that they’ll pull off this transition well.”

Current Diebold customers, such as the state of Maryland, expressed a bit more concern.

“Like all election officials, we are concerned about the impact that this sale will have on the voting system market. Clearly there is one less large vendor and therefore significantly less competition,” said Ross Goldstein, deputy state administrator. “Without competition, innovations, continued research and development, and a jurisdiction’s ability to obtain favorable pricing is greatly reduced.”

Despite reservations, Goldstein does see some minor advantages to the consolidation like the ability for jurisdictions to work together.

“Maryland has the advantage that all of the contracts are managed centrally, as opposed to separately among various counties. The central management and large scale nature of the contracts allows us certain leverage to ensure quality services and support,” Goldstein said.

“One development that has been helpful and is probably even more urgently needed now, is frequent communication and interaction with other clients of the vendor. Sharing experiences, hearing about possible pitfalls, and collectively holding the vendor to a standard of service may be a way to effectively managing this newly created giant.”

Still, there are concerns about one company controlling so much of the industry. Pam Smith with Verified Voting expressed unease about the impacts of having fewer vendors could have on the industry.

“Is it a bad thing [to having fewer elections vendors]? Here’s the thing, from the most basic level it shouldn’t matter who makes or sells the voting equipment with respect to transparency and security, if the system you have is auditable and that robust audits are being conducted, then it shouldn’t matter because you have some safeguards,” Smith said. “But in practical terms, how does this play out for a county that wants a new system or to improve the system it has?”

Smith noted that competition is often one those things that keeps pricing low and gives more negotiating power to jurisdictions that want get new, upgrade old or simply change voting systems. Smith also pointed out consolidating election vendors may also stifle innovation in new systems, equipment and ideas like open-source voting.

It’s the concerns about a monopoly on the industry that this week prompted Sen. Charles Schumer (D-N.Y.) to send a letter to the U.S. Department of Justice urging the full review of the sale.

In the letter sent to Attorney General Eric Holder, Schumer, who heads the Senate Rules and Administration Committee and is a senior member of the Senate Judiciary Committee, requested the Justice Department’s Antitrust Division probe the deal based on anti-competitiveness concerns.

“If this acquisition proceeds, one company could control over three-quarters of the U.S. market for voting systems. Given other factors, including high barriers to entering the market, I am deeply concerned that local governments and taxpayers will not be getting a fair deal because too much market power will be held in too few hands,” Schumer wrote.

This is not the first time that ES&S has been involved (or potentially involved) in a DOJ review. In 1997, American Information Systems purchased Business Records Corporation and became the company now known as ES&S. At the time, DOJ stepped in and forced a divestiture of the optical scan voting equipment business to another company, Sequoia Voting Systems.

A spokesperson for the Department said DOJ did not have a comment on the letter or any potential review at this time.

In addition to Schumer’s letter to DOJ, late last week, Texas-based, Hart InterCivic filed a lawsuit against Diebold Inc. and ES&S in U.S. District Court in Delaware.

“Simply put, we're not surprised by this announcement. The more important question is what Hart intends to do about it,” the company wrote in an e-mail to its customers on Monday. “Our reaction to this transaction is straightforward: we believe it to be unlawful and, accordingly, Hart filed a complaint this afternoon against Diebold and ES&S in the United States District Court for the District of Delaware, seeking to stop this transaction.”

The suit seeks a temporary and permanent injunction against the sale because it “poses a significant and imminent threat of irreparable antitrust injury to plaintiffs. The transaction also poses a significant and imminent threat to irreparable harm to the other vendors…”

“In an industry with long expected product lifecycles and high switching costs, we know incumbency is a significant determinant of market share,” the company e-mail said. “If allowed, we further believe the creation of a monopolistic-sized voting system supplier will lead to substantial anticompetitive barriers, decreased innovation and limited choices for jurisdictions.”

Lewis questions to what end opponents of the sale are hoping for should DOJ or the lawsuit stop the sale.

“You can’t force someone to stay in business,” Lewis said. “So the sale doesn’t go through and Premier still goes out of business.”

Lewis speculated that the potential sale of Premier to ES&S and the subsequent request for DOJ review and the Hart lawsuit is just the start of things to come.

According to Schafer at Sequoia, the company has no intentions of either joining the current lawsuit or filing its own lawsuit with regard to this matter.

“The elections industry is not for the faint of heart. And that goes for everyone involved — from our nation’s election officials, first and foremost, to advocates and academics to voting technology providers,” Schafer said.