The Justice Department is investigating the controversial sale of a Diebold Incorporated unit that makes voting machines to its larger competitor, Election Systems and Software, according to two people familiar with the matter.
The sale, announced in September, has raised concerns from voting-rights groups and Sen. Chuck Schumer (D-N.Y.), who urged DOJ to investigate in a letter to Attorney General Eric Holder. Last week, the New York Times proposed that the Antitrust Division try to block the sale.
Another voting-machine manufacturer, Hart InterCivic, filed its own suit asking a federal judge in Delaware to stop the deal. ES&S controls 68% of the market for voting machines with the Diebold purchase, the complaint alleges.
Hart Intercivic’s complaint also accuses Diebold and ES&S of engaging in other anti-competitive behavior, including raising prices on services once customers had already signed on to a bid.
The Schumer-chaired Senate Rules and Administration Committee, which has an oversight role on federal elections, is conducting its own review of the deal.
The $5 million sale also raised eyebrows for the firms’ public relations strategy. The companies waited until the deal had closed to make a formal announcement, and sidestepped federal antitrust reporting requirements that require the parties of a transaction that meets a threshold size to alert the Justice Department and the Federal Trade Commission of their intentions, then wait 30 days to proceed.
The mechanics of voting have been subject to heightened scrutiny since the 2000 Florida election stalemate and the infamous hanging chads it produced.
Diebold has been the target of criticism over the reliability of its touch-screen machines and over a chief executive who was a top fundraiser for George W. Bush’s 2004 campaign. Diebold posted a third-quarter loss today based on a $31.4 million loss on the sale.
A spokeswoman for the Justice Department declined to comment, and attorneys for Diebold, ES&S and Hart InterCivic did not respond to requests for comment.