Fujitsu's bid for 80 percent of Fairchild Semiconductor exposed that pre-1988 CFIUS was merely advisory, forcing its review under the Hart-Scott-Rodino Act instead of a national-security veto

In 1987 Fujitsu sought an 80 percent stake in Fairchild Semiconductor, then owned by Schlumberger (the year and Schlumberger's ownership are from the CRS account quoted in claim-exon-florio-triggered-by-fujitsu-fairchild-not-toshiba; Graham & Marchick give neither). Before the Exon-Florio Amendment existed, the Committee on Foreign Investment in the United States (CFIUS, established by a 1975 executive order) had no power to block such a sale. Graham & Marchick describe pre-1988 CFIUS as "a purely advisory body to the president," "not empowered to pass regulations or take substantive action short of recommending that the president invoke the [International Emergency Economic Powers Act]." Invoking that act required a national-emergency declaration — in Senator Wilson's 1987 Senate testimony, as the source reproduces it, "virtually the equivalent of a declaration of hostilities against the government of the acquirer company." So the Reagan administration, through the Department of Justice, said it would scrutinize the Fairchild sale under the ordinary antitrust machinery of the Hart-Scott-Rodino Act instead (Fujitsu abandoned the bid before any review concluded, citing "rising political controversy in the United States") — a mismatch between the tool and the threat that Senator Exon's bill was "designed, in large measure" to close, by giving the president explicit, lower-stakes authority to block such takeovers without declaring a national emergency.

This is the mechanical answer to why the Fujitsu–Fairchild episode, rather than merely alarming Congress, produced a specific new statute: existing law offered no proportionate response.

Provenance: Graham, Edward M., and David M. Marchick. US National Security and Foreign Direct Investment. Institute for International Economics, 2006, pp. 40–42. https://www.piie.com/publications/chapters_preview/3918/02iie3918.pdf.