What was so bad about pools in the late 1800's? I understand what they were but they were banned by the government in the Interstate Commerce Act and I don't understand why they were so harmful? How did they give more money to railroad companies? I'M SO CONFUSED.
According to Dictionary.com, a pool is:
"4. an association of competitors who agree to control the production, market, and price of a commodity for mutual benefit, although they appear to be rivals."
Pools were harmful because they controlled the prices charged by the member companies. Pools often set exorbitant prices and the customers had to pay them to receive the services.
To understand why pools were considered harmful in the late 1800s, we need to look at the context of the time. During this period, railroad companies played a significant role in the transportation industry, and they were operating as competitors. However, instead of competing against each other, some railroad companies formed pools.
A pool was essentially an agreement among competing railroad companies to control the production, market, and price of a commodity, in this case, transportation services. By forming a pool, these companies were able to eliminate competition and fix prices at artificially high levels. This meant that customers had to pay inflated prices for transportation services because they had no alternative options.
The harmful aspect of pools was that they allowed these railroad companies to abuse their market power and exploit customers. This resulted in customers paying more for transportation services than they would have in a competitive market. In addition, the pool members would benefit from increased profits as a result of charging these higher prices.
To address the issue of pools and regulate the railroad industry, the U.S. government passed the Interstate Commerce Act in 1887. This act was the first attempt to regulate interstate commerce and included provisions to prevent unfair practices like pooling. It established the Interstate Commerce Commission (ICC) to enforce the act and oversee railroad rates and practices.
The main idea behind banning pools in the Interstate Commerce Act was to promote fair competition and protect customers from monopolistic practices. By prohibiting railroad companies from colluding and fixing prices, the government aimed to ensure that customers had access to fair prices and options for transportation services.
In summary, pools were harmful because they allowed railroad companies to control prices and charge customers exorbitant rates. Banning pools in the Interstate Commerce Act was a necessary step to foster competition, protect customers, and regulate the railroad industry.