during these three decades. They may all be divided into three main types among agreements whose object was self-regulation of competitive forces.

The first type is not inaptly designated as the conference type of pool, or "gentlemen's agreement," without forfeit for failure to conform to their word. These were based on social or moral rather than on any legal obligation. A second variety was the clearing-house type, which imposed forfeits and had a central office in charge of a supervisor to whom reports were regularly submitted and who reported to members. Such was the American Wall Paper Company of 1880-88. A third was the disciplinary type whose capacity to penalize irregularity maintained rates or prices. The Southern Railway and Steamship Association was a striking example of this species.

Of the clearing-house type of pools was that in the cordage industry. These were in force more or less continuously from 1860 to 1890. James M. Waterbury, then President of the National Cordage Company, described before the Industrial Commission, 1901, their pooling operations as follows: "All manufacturers would meet and agree to divide the business of the country upon certain percentages, and when they had agreed on the percentages the rule was that each manufacturer should make his returns monthly to a supervisor, and if his business ran beyond his

percentage he paid in to the supervisor so much per pound on the excess beyond his percentage; and then those that went below that percentage drew out from the supervisor an amount as much per pound as they went below their percentage. The supervisor acted as a clearing-house for the manufacturers.

"Q. Did any of them last long?

"A. I think they lasted about three years, and they were broken up by other new competition starting, or by some men not being willing to act up to the agreement. Of course, there was no legal way of holding a man to his agreement. We had no written agreement."

Of a similar order was the Globe Naval Stores agreement, by which four operators in these products pooled their businesses. They each agreed to act as agents for the Globe pool, to report all transactions daily to the principal office, to settle all profits and losses in account with the Globe every six months, to apportion output and to divide territory. This agreement began April 1, 1905, to run for five years. The steel rail pool of 1888 bound its members not to sell in excess of current allotments, without first obtaining the consent of the Board of Control-a clear case of limiting output.* The Michigan Lumber Dealers' Association (1888) was organized "to establish the equitable principle that

*Industrial Combinations and Trusts, W. S. Stevens. The Macmillan Company, New York. Ch. 9.

the retailer shall not be subject to competition with the parties from whom he buys."

Such violations of competitive code occurred where producers shipped directly to consumers (builders), ignoring the local retailer.

The

risks to capital invested in the retail trade were greatly enhanced thereby, and this pool sought self-protection from trade practices regarded as unfair within its own class. The powder pool, in the "Fundamental Agreement" of 1890-95, avowed its objects to be "for the purpose of avoiding unnecessary losses in the sale and disposition of such powder by ill-regulated or unauthorized competition and by underbidding by the agents of the parties hereto, and for the purpose of protecting consumers and the public from unjust fluctuations in prices and from unjust discriminations." By this agreement the country was divided into seven geographical districts within which uniform prices were to prevail for sporting and blasting powder. The socalled pools in the steel rail industry, as Charles M. Schwab bore witness, were simply " 66 agreements between the managers at the various works to sell steel rails at the same price at the same point."

3. Why Pooling Agreements Failed

Thousands of pooling agreements were in force in the period prior to the Interstate Commerce Act of 1887, both in industrial and in

mercantile circles of business. Their prohibition in that law discredited them in transportation circles at least. Long before that date pools in many corporations had given place to more compact forms of organization, taking either the trust form or that of the holding company. The depression of 1893-95 demonstrated that something more than a "gentlemen's agreement was needed in most cases to keep industrial rivalry from going to unprofitable limits. Steel bars, for instance, during 1899 went up two and one-half cents a pound at Pittsburgh in the boom following the tariff of 1897. Within a year they sold below a cent a pound in a violent business reaction. "Under the best conditions," testified an official of Jones & Laughlin, Limited, "it would require an average of eight to ten years to bring the manufacturers' profit to a point where he could live." *

It was such irregularity in prices, due to rapid changes in conditions of demand and supply, that made investment in industry too uncertain to endure on the old basis of pooling without the law. The disease had ceased to be merely industrial. It had become financial and was undermining the credit of manufacturing corporations among which these evils prevailed.

In the wall paper industry there was a typical pooling agreement, to secure uniform prices * United States Industrial Commission, Vol. XIII, p.

and terms of credit, for several years prior to 1873. Hard times brought on severe competition, nullifying the pooling obligations which were without means of enforcement. With this came the usual price depreciation and unprofitable business. In the second compact, 1880, security of insignificant amount was given by members for stricter performance of the agreement. In due time, however, abnormally high prices, following combination in the American Wall Paper Company, disrupted the pool. Members undersold their own schedule of prices and failed to report as they had agreed to.

These alternating depressions and booms, striking both extremes of price movements, proved equally fatal to cooperation. Again a period of open market ensued, prices were demoralized, dealers with stocks on hand suffered severe losses in the declines, and the impaired credit of manufacturer and merchant resulted in failures to meet liabilities. Out of this emergency, in which both industrial and commercial competition had threatened financial ruin to the wholesale and retail trades alike, the makers of wall paper combined in a genuine trust organization as The National Wall Paper Company.

Because of the instability of these pooling arrangements, from lack of discipline through penalties imposable on those within, as well as through failure to guard against competitive assaults from without, pooling generally failed