Kubota under FTC’s microscope

Kubota’s recent $2 million settlement with the Federal Trade Commission is the largest fine the agency ever levied against a company for claiming its products were made in America, and the Japan-based equipment company will likely see extra scrutiny from the FTC in coming years.

The Japan-based manufacturer’s U.S. subsidiary, Kubota North America, is responsible for the fine. This was the second order for a similar offense in 1999. In a Jan. 25 court order the FTC said Kubota NA has since 2021 wrongly labeled components of its equipment as made in America when they were actually imported.

The order for the 1999 FTC lawsuit expired in 2019, but might explain why the current fine was so large, Richard Newman, FTC enforcement defense lawyer at New York-based firm Hinch Newman, told Equipment Finance News.

The 1999 case didn’t come with a fine but an order for more transparency with the FTC regarding Kubota’s labels, packaging and promotions.

Kubota will now face numerous reporting requirements based on the FTC settlement.

“The FTC has been enforcing civil monetary penalties against alleged bad actors since the enactment of the Made in USA Labeling rule,” Newman said. “For example, the FTC has recently obtained numerous six-figure settlements for Made in USA violations, in addition to requiring modifications to product labels and marketing materials.”

The case is also “a reminder that alleged repeat bad actors may be subject to larger penalties,” Newman said.

To remain in compliance with the Made in USA rules, international companies must meet specific qualifications:

• Final assembly or processing must occur in the United States, with “all significant processing of the product” being on U.S. soil;
• “All or virtually all” of the components used to make the products must be sourced from the U.S., not wholly imported from overseas as Kubota’s were in this case.

The FTC also mandates Kubota now will include “clear and conspicuous disclosure” about the extent to which it uses foreign parts, components or processing.

Kubota told EFN it has “cooperated fully” with the FTC and said it is “voluntarily addressing” the agency’s concerns.

According to Kubota’s fiscal 2023 earnings report posted in September, Kubota North America’s revenue was up 18%, driven mainly by an increase in demand for mowers, tractors and increased housing and infrastructure development. The company’s overall North American revenue in 2023 was $938.5 million.

Shares of Kubota Corp. [OTCPK:KUBTY] were trading at $76.24 at market close today, up 1.4% or 55 cents from market open. Kubota has a market capitalization of $17.68 billion.

Editor’s note: All figures have been converted to U.S. dollars.

Registration is now available for Equipment Finance Connect. The dealer-centric equipment lending and leasing event of the year offers opportunities for dealers to learn new strategies, foster valuable partnerships and emerge with ideas to immediately apply to their businesses. Learn about free dealer registration at EquipmentFinanceConnect.com.