President Biden’s Block of Nippon Steel’s U.S. Steel Acquisition Sparks Legal Battle
Nippon Steel and U.S. Steel have filed lawsuits challenging President Biden’s decision to block Nippon Steel’s proposed $15 billion acquisition of U.S. Steel. The companies argue the administration’s action lacked a rational legal basis and was politically motivated. The lawsuits, filed in the U.S. Court of Appeals for the District of Columbia and the U.S. District Court for the Western District of Pennsylvania, contend that the decision jeopardizes significant planned investments in U.S. steel production. Nippon Steel had pledged $2.7 billion to modernize U.S. Steel’s facilities in Indiana and Pennsylvania and committed to maintaining U.S. production capacity for a decade, subject to government approval.
President Biden justified his veto by citing national security concerns, emphasizing the importance of a strong, domestically owned steel industry. While the administration maintains the decision was unrelated to U.S.-Japan relations, this marks the first time a U.S. president has blocked a merger between a U.S. and Japanese company. The decision followed a deadlock within the Committee on Foreign Investment in the United States (CFIUS) regarding the deal’s potential national security risks. Biden’s action, made within his 15-day review period after receiving the CFIUS report, comes just weeks before the end of his term.
The lawsuits also level accusations against Cleveland-Cliffs Inc., a rival steelmaker, and its CEO, Lourenco Goncalves, along with United Steelworkers President David McCall. The plaintiffs allege a coordinated effort to thwart the acquisition, citing Cleveland-Cliffs’ previous, unsuccessful $7 billion bid for U.S. Steel. They claim Goncalves and McCall engaged in anticompetitive and racketeering activities to prevent any acquisition of U.S. Steel besides Cleveland-Cliffs, thereby harming U.S. Steel’s competitiveness. McCall has dismissed these allegations as baseless, asserting that Biden’s decision protected vital U.S. interests and national security. Cleveland-Cliffs has yet to respond to requests for comment.
Nippon and U.S. Steel maintain they proactively addressed CFIUS concerns by submitting three draft national security agreements. They further allege that CFIUS was prevented from offering counterproposals or engaging in further discussions, suggesting the review process was manipulated to support a predetermined outcome. The companies accuse the administration of using “undue influence to advance its political agenda.” Adding to the complexity, President-elect Donald Trump has also voiced his opposition to the deal, indicating his intent to utilize tax incentives and tariffs to bolster U.S. Steel under his administration. This stance was reiterated on his Truth Social platform shortly after the lawsuits were filed. Following the lawsuits, shares of U.S. Steel rose more than 4% before the opening bell.