782
Opinion of the Court
trust laws by § 2(b)," id., at 129 (emphasis added), and each of the three criteria we identified concerned a quality of the practice in question: "first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry," ibid. (emphasis in original).
The Court of Appeals did not hold that, under these criteria, the domestic defendants' conduct fell outside "the business of insurance"; to the contrary, it held that that condition was met.10 See 938 F. 2d, at 927. Nor did it hold the domestic defendants' conduct to be "[un]regulated by State Law." Rather, it constructed an altogether different chain of reasoning, the middle link of which comes from a sentence in our opinion in Royal Drug Co. "[R]egulation . . . of foreign reinsurers," the Court of Appeals explained, "is beyond the jurisdiction of the states," 938 F. 2d, at 928, and hence § 2(b) does not exempt foreign reinsurers from antitrust liability, because their activities are not "regulated by State Law." Under Royal Drug Co., "an exempt entity forfeits antitrust exemption by acting in concert with nonexempt parties." 440 U. S., at 231. Therefore, the domestic insurers, by acting in concert with the nonexempt foreign insurers, lost their McCarran-Ferguson Act antitrust immunity. See 938 F. 2d, at 928. This reasoning fails, however, because even if we were to agree that foreign reinsurers were not subject to state regulation (a point on which we express no opinion), the quoted language from Royal Drug Co., read
10 The activities in question here, of course, are alleged to violate federal law, and it might be tempting to think that unlawful acts are implicitly excluded from "the business of insurance." Yet § 2(b)'s grant of immunity assumes that acts which, but for that grant, would violate the Sherman Act, the Clayton Act, or the Federal Trade Commission Act, are part of "the business of insurance."
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