Pools

Definition

Pools refer to agreements between competing businesses to fix prices, control market shares, or limit competition in a particular industry. This practice emerged during the late 19th century, a time of rapid industrialization and the rise of big business, as companies sought to stabilize their profits and reduce the unpredictability of market fluctuations.

5 Must Know Facts For Your Next Test

1. Pools were commonly established among railroad companies, allowing them to set shipping rates and minimize competition on certain routes.
2. The practice of forming pools was often secretive and informal, making it difficult for regulators to identify and address anti-competitive behavior.
3. During the late 1800s, pools were seen as a way for struggling industries to stabilize themselves during periods of economic downturn.
4. The Sherman Antitrust Act of 1890 aimed to combat pools and other forms of monopolistic practices by making it illegal to restrain trade or commerce.
5. Despite legal challenges, pools continued to exist in various forms into the early 20th century, as businesses sought to maintain profitability in a rapidly changing economy.

Review Questions

• How did pools influence competition in industries like railroads during the period of industrialization?
  • Pools significantly influenced competition by allowing railroad companies to collaborate on setting prices and controlling market shares, rather than competing against each other. This led to more stable rates for shipping and reduced the risk of destructive price wars that could harm profits. As a result, while pools might have stabilized some aspects of the market, they also limited fair competition, ultimately leading to calls for regulatory intervention.
• In what ways did the establishment of pools conflict with the principles outlined in the Sherman Antitrust Act?
  • The establishment of pools directly conflicted with the principles of the Sherman Antitrust Act, which sought to promote fair competition and prevent monopolistic practices. By coordinating pricing and reducing competition among members, pools undermined the free market system that the Act aimed to protect. This law made it illegal for businesses to engage in agreements that restrained trade or commerce, positioning pools as a target for legal action as regulators sought to dismantle such anti-competitive arrangements.
• Evaluate the long-term impact of pooling agreements on business practices in the United States after the rise of regulation in the early 20th century.
  • The long-term impact of pooling agreements on business practices in the United States post-regulation was significant in shaping how companies approached competition and collaboration. While regulation like the Sherman Antitrust Act curtailed overt pooling practices, businesses adapted by forming more complex structures such as trusts and cartels that could achieve similar ends without direct violations. This evolution reflects an ongoing tension between business interests seeking stability through cooperation and regulatory frameworks designed to ensure competitive markets, influencing corporate behavior and regulatory responses well into modern times.

Related terms

Monopoly:

A market structure where a single seller dominates the entire market, allowing them to set prices and control supply without competition.

Trust: A group of companies that come together to form a single entity, often to reduce competition and increase market control, typically associated with the Standard Oil Company.

Cartel: An association of producers or suppliers that agree to coordinate their production and pricing strategies to maximize profits and control the market.