Nippon Steel Corporation and U.S. Steel Corporation have jointly filed a federal lawsuit challenging the Biden administration’s decision to block their proposed nearly $15 billion acquisition deal.
The lawsuit was filed in response to President Joe Biden’s order to halt the transaction, which was based on national security concerns. The companies allege that this decision was made for “purely political reasons” and that the review process by the Committee on Foreign Investment in the United States (CFIUS) was manipulated to advance a political agenda. Companies have claimed that this action violated their constitutional right to due process.
Additionally, Nippon Steel and U.S. Steel have filed a second lawsuit in the U.S. District Court for the Western District of Pennsylvania, accusing Cleveland-Cliffs Inc., its CEO Lourenco Goncalves, and United Steelworkers Union President David McCall of colluding to prevent the deal, aiming to monopolize the domestic steel market. This legal action is seen as an attempt to salvage the merger and protect their legal rights to proceed with the transaction.
U.S. Steel plays a significant role in supplying steel for defense, infrastructure, and other critical sectors, where any foreign control could be seen as a vulnerability. The primary justification for blocking the deal often revolves around national security. The Committee on Foreign Investment in the United States (CFIUS), which reviews transactions that could result in control of a U.S. business by a foreign entity, often assesses deals involving key industries like steel for potential risks. Along with the reasons attributed to US Presidential election, there has been a broader conversation about economic sovereignty and the control of strategic industries. Allowing a foreign company, even from an ally like Japan, to acquire a major American steel producer might be seen as diminishing U.S. economic autonomy over key sectors.
The United Steelworkers Union has been vocally against the deal, arguing that it threatens jobs and could lead to less favorable labor conditions. Biden’s stance could be seen as supportive of union interests, which traditionally align with Democratic politics. Biden’s administration has emphasized revitalizing American manufacturing. Blocking this acquisition could be part of a larger strategy to ensure that U.S. companies remain in U.S. hands, promoting self-reliance in manufacturing and reducing dependency on foreign control in key sectors.
There was significant pushback from both sides of the political spectrum in Congress, which might have influenced the administration’s decision. The deal faced scrutiny not just for economic reasons but also due to the broader implications of foreign ownership in sectors deemed critical to national interests. Even though Japan is a close ally, there’s a strategic consideration about the global supply chain and the concentration of control over essential industries. There might be concerns about how such an acquisition could affect future U.S. strategies in trade, particularly with China, where steel trade has been contentious.
Galactik Views