Attorney Advertising
FTC Premerger Notication Office Narrows
Application of HSR Rule 802.5:
e Investment Rental Property Exemption
The Federal Trade Commission (“FTC”) Premerger Notification Office (“PNO”)
recently issued updated guidance regarding how the PNO will interpret and apply
going forward the exemption for investment rental property set forth in 16 C.F.R.
§802.5 of the regulations promulgated under the Hart-Scott-Rodino Antitrust Im-
provements (“HSR”) Act. This guidance supersedes all prior informal interpreta-
tions and advice issued by the PNO regarding Rule 802.5.
The PNO’s new position significantly narrows the situations in which the Rule
802.5 exemption will apply. In particular, under the PNO’s new approach,certain
acquisitions of pipelines, billboards, and communications towers (and entities that
hold such assets) that were exempt under the 802.5 investment rental property ex-
emption pursuant to prior PNO informal interpretations no longer will be exempt
going forward.
HSR Rule 802.5 exempts acquisitions of real property assets that are held by the
seller and will be held by the buyer solely for rental or investment purposes and that
will be rented only to entities not included within the buyer (except for the sole
purpose of maintaining, managing, or supervising the operation of the investment
rental property assets). Previously, the PNO had applied this exemption broadly to
acquisitions of pipelines, billboards, and communications towers as long as the serv-
ices related to these assets were provided to third parties.
Under the PNO’s new position, the Rule 802.5 investment rental property exemp-
tion only will apply in situations where the seller is behaving, and the buyer intends
to behave, like a landlord — in other words, where the seller and buyer are leasing
or intend to lease the premises and are receiving or intend to receive rental income
without regard to the specific use of the property. If the buyer in some way will
participate in the business being conducted on the property — for example, by pro-
viding storage or being a conduit for materials passing through the property —
then the 802.5 exemption is not available.
For example, if the buyer proposes to acquire natural gas pipelines that it will use to
provide midstream transportation services to third parties, the transaction is not ex-
empt under Rule 802.5. On the other hand, if the buyer intends to lease the
pipelines to a midstream transportation provider who will contract with third par-
ties to transport their product through the pipelines, the transaction will be exempt
under Rule 802.5 provided that the seller also rents or holds out for rent the
pipeline assets to a third party midstream transportation provider. Similarly, the ac-
KIRKLAND ALERT
July 2015
Under the PNO’s new
position, the Rule
802.5 investment
rental property ex-
emption only will
apply in situations
where the seller is be-
having, and the buyer
intends to behave, like
a landlord.
KIRKLAND ALERT | 2
quisition of billboard assets is not exempt under Rule 802.5 if the buyer will use or
the seller is using the assets to generate revenues from advertisers as part of their re-
spective advertising businesses, as opposed to simply holding the real property and
receiving rental income. Likewise, the acquisition of telecommunications towers is
not exempt under Rule 802.5 if the buyer intends to use the assets to provide
telecommunications services to wireless providers.
In its notice, the PNO maintains that the prior informal interpretations applying
the Rule 802.5 investment rental property exemption expanded the rule’s applica-
tion “well beyond” its original intent and that the PNO’s current approach merely
restores the original scope of the exemption. The PNO’s new position on this topic
underscores the importance of keeping up to date on current PNO guidance re-
garding the application of the HSR rules and exemptions. It also demonstrates that
the PNO regularly evaluates its informal guidance and will not hesitate to revise
prior positions should it identify compelling reasons to do so.
The announcement of the PNO’s revised position on Rule 802.5 can be found at:
https://www.ftc.gov/news-events/blogs/competition-matters/2015/07/hsr-rule-
8025-investment-rental-property-exemption.
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© 2015 KIRKLAND & ELLIS LLP. All rights reserved.
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If you have any questions about the matters addressed in this Kirkland Alert, please contact the following Kirkland authors or your regular
Kirkland contact.
Ellen M. Jakovic
Kirkland & Ellis LLP
655 Fifteenth Street, N.W.
Washington, D.C. 20005-5793
+1 (202) 879-5915
Michael D. Thorpe
Kirkland & Ellis LLP
300 North LaSalle
Chicago, IL 60654
+1 (312) 862-2194
Bilal Sayyed
Kirkland & Ellis LLP
655 Fifteenth Street, N.W.
Washington, D.C. 20005-5793
+1 (202) 879-5192
Kurt Wunderlich
Kirkland & Ellis LLP
300 North LaSalle
Chicago, IL 60654
+1 (312) 862-4438
The PNO’s new posi-
tion underscores the
importance of keeping
up to date on current
PNO guidance regard-
ing the application of
the HSR rules and ex-
emptions.
