Railroad pool facts for kids

Railroad pools were special agreements between different railroad companies in the United States. Imagine several train companies all wanting to carry goods and passengers between the same two cities. Instead of competing fiercely, which could lower prices too much for everyone, they would form a "pool." This pool was a way for them to share the business or the money they earned.

Think of it like this: if three companies all ran trains on the same route, a pool would help them decide how to divide the customers or the money they made. This was done to keep prices fair and stop them from having "railway wars," where they would cut prices so low that no one made a profit.

Louis Boisot Jr., a lawyer from Chicago, explained it well. He said railroad pools were like contracts where rival train companies joined their business together. Then, they would split the total business or money among themselves using agreed-upon percentages. This helped them avoid too much competition.

How Railroad Pools Started

In the late 1800s, railroad companies were growing fast. They often competed very strongly, which sometimes led to problems.

Early Ideas for Sharing Business

Around 1885, two important railroad leaders, William Henry Vanderbilt and Hugh J. Jewett, talked about railroad pooling. They wrote a letter to a group called the Hepburn Committee in New York. They described pooling as a good way to stop "railway wars" and make sure prices for train services were steady.

At this time, many people thought pooling was a good idea, and it was even becoming more accepted by law. In some parts of Europe, like Belgium and Prussia, governments even owned parts of the railroads and encouraged these kinds of agreements.

When Pooling Became Illegal

However, things changed in the United States. In 1887, the United States Congress passed an important law called the Interstate Commerce Act of 1887. This law made it illegal for railroad companies to make pooling agreements. The government wanted to make sure there was fair competition and that no single group of companies had too much control over prices.

This law was a big step in how the government regulated businesses, especially large ones like railroads. It aimed to protect the public from unfair prices and practices.