although the agreement here was between the railroad companies, rather than between the coal mining companies Each railroad (all of them were engaged in the mining of coal either directly or indirectly) was allotted a certain percentage of the total shipments of anthracite coal, and was expected to take care that the amount of coal shipped by it, including that carried for independent coal mining concerns, did not exceed this percentage. Sometimes penalties were imposed for the violation of these agreements; at other times not. When provision was made for penalties, the railroads exceeding their allotment contributed to a fund, which was distributed among the railroads that had carried less than their allotment.1

One of the most important pools regulating output was the steel rail pool, formed in August, 1887.2 The members of this pool produced more than 90 per cent of the country's output of steel rails. By the agreement adopted the total output as then agreed upon was divided among the companies in definite proportions, and provision was made for a Board of Control, which, with the written consent of 75 per cent of the tonnage, might increase the pool's output from time to time. The fixing of prices was not provided for in the memorandum of agreement, though an informal understanding was reached. This pool was comparatively successful. The large capital necessary for the manufacture of steel rails discouraged new competition, and the practice on the part of railway officials of buying the necessary rails once a year acted as a stabilizing factor. Nevertheless, the pool collapsed in 1893, because of a disagreement over the division of tonnage, the situation being aggravated by the prevailing industrial depression, which rendered imperative a reduction in the total output. In 1894 the pool was reorganized, though not without considerable difficulty. The depressed state of the trade led to new violations of the agreement in 1896, and in February of the following year the pool was again broken up.

1 Jones, The Anthracite Coal Combination in the United States, pp. 41-50, 54-56.

2 Report of the Commissioner of Corporations on the Steel Industry, part I, pp. 68-72.

This second dissolution of the pool was followed by a drastic reduction in prices. Whereas the pool price for steel rails had been $28 per ton, upon the termination of the pooling agreement the price fell to $16.50.1

Another important pool in the steel industry was the so-called wire nail pool, organized in 1895.2 The Association of Wire and Cut Nail Manufacturers provided for a division of the output among the members of the association, and also fixed the amount of nails to be offered for sale each month, and the price at which they should be sold. Immediately upon its organization the pool advanced the price of nails. Whereas the "base" price had been $1.20 per keg in June, 1895, by May, 1896, it had risen to $2.55. In view of the fact that no large amount of capital was required to engage in the nail business, it was to be anticipated that the life of the pool would be short. Whether or no its existence was prolonged by its audacious price policy, it came to an end in Deember, 1896, about a year and a half after its organization.

A pool in the meat-packing industry was organized as early as 1885; and since that date pools of one kind or another have been maintained almost steadily. The pool of 1885 determined the quantity of meat that each member might ship, and by this means succeeded in exercising considerable control over the price of meat. In 1893 a more complete and effective agreement was entered into. As the result of this agreement the representatives of Swift and Company, Armour and Company, and Morris and Company held weekly meetings, which were occasionally participated in by representatives of the Cudahy Packing Company, and Hammond and Company. At these meetings each of the companies reported on its shipments into designated territories during the previous week and on the prices received. These reports served as the basis for the payment of fines for

1 Brief for the United States in United States v. United States Steel Corporation (no. 481), vol. I, pp. 167–168.

2 Report of the Commissioner of Corporations on the Steel Industry, part I, pp. 72-73; and Edgerton, Political Science Quarterly, 12, pp. 246–272. 3 Report of the Federal Trade Commission on the Meat-Packing Industry, part II, ch. 1.

overshipments (40c. per 100 lbs.), and for the allotment for the ensuing week. In order that full secrecy as to these arrangements might be maintained and the consequences of legal proceedings avoided, the parties to this agreement were designated by certain letters of the alphabet rather than by their real names. This pooling arrangement continued from 1893 to 1896. During 1897 the pool was not effective because of the competition of Schwarzschild and Sulzberger, an important company not a member of the pool. The following year a new pool was entered into, including this time the firm of Schwarzschild and Sulzberger. This arrangment lasted until April, 1902, when because of the public agitation against the packers a decision was made to dissolve the pool. Thereupon the secretary destroyed all the records of the meetings of the pool.

The chief difficulty in this third type of pool lay in securing an agreement upon the percentage allotment, both at the organization of the pool and upon its renewal from time to time. An agreement might be reached at the time the pool was organized for an allotment based on capacity, previous sales, or what not. Yet this did not remove the difficulty; for each company was strongly tempted to enlarge its plant, in order that upon the expiration of the pool it might demand an increased percentage as a condition of entry into a new pool. If this demand was not acceded to, as it commonly was not, it became impossible to effect a renewal of the agreement; and with the increased facilities for production the market was flooded, and prices fell, perhaps even lower than prior to the formation of the pool.) This was well illustrated in the experience of the steel industry. Upon the disruption of the steel rail pool in February, 1897, the price of steel rails fell to $16.50, which was about $4 per ton below the average price of rails during the six months preceding the organization of the pool.

In these pools regulating or apportioning the output there may or may not have been an agreement as to price. In the anthracite railroad pool of 1873, for example, a schedule of prices was agreed upon, and authority was given to a Board of Control to determine the prices to be charged from time to time; while in

4.

the pool of 1885 in this same industry nothing was said in regard to prices. The steel rail pool of 1887 was silent on the subject of prices; but the powder pool of 1889, known as the Fundamental Agreement, gave a central board full power to fix prices. Yet whether or no any price-making machinery was set up, it was regulation of prices that was in the minds of those

were instrumental in organizing output pools. Obviously es could not be maintained, much less advanced, unless the separate concerns were prevented from increasing their output at will; and the regulation of the output was thus the means whereby the desired control over prices was to be exercised.

Fourth. A good illustration of a pool providing for a division of the field is the agreement between the Addyston Pipe and Steel Company and five other corporations, all engaged in the business of manufacturing cast iron pipe, and selling in particular to municipal corporations, gas companies, water companies, and large institutions accustomed to invite bids from various concerns. Under this agreement, entered into in 1894 and modified in 1895, the companies divided the United States into three parts: reserve cities, free territory, and pay territory. The reserved cities were reserved for certain companies, and none of the other companies was to do any business there. Free territory was territory in which any one of the companies could make sales without restriction. But the bulk of the United States (thirty-six states in all) was designated as pay territory; and in this territory (in which the companies had a practical monopoly because of the limitations on competition imposed by high freight rates) the conditions of carrying on business were definitely laid down. The six companies were to refer all inquiries for pipe in this section to a representative board, and this board was to fix the price at which all pipe in pay territory should be sold. The companies were then to bid on the order, and the one that offered to pay the highest bonus obtained the contract, which was to be executed at the price already set by the board. In order that the existence of the pool might not be 1175 U. S. 211-248; and Argument of Hon. E. B. Whitney, Ripley's Trusts, Pools and Corporations (1916), pp. 78–96.

suspected, the other companies were to make fictitious bids, bids sufficiently high to insure that the contract would not be awarded to them. At the end of each year, after deducting the expenses of the association, the bonuses were to be divided among the members of the pool on the basis of their annual shipments into pay territory he profits of each company, therefore, consisted of the excess the price over the cost on the jobs awarded to it, plus the bonuses received by it on work taken by the other companies. These profits were greater, of course, than they would have been without the agreement, since the price to be charged for pipe was fixed by the representative board, and therefore was not subject to competition between the companies. In 1899 this pool was declared illegal by the Supreme Court of the United States.1

A division of territory was also established by the wire nail pool; and more recently by the meat packers as regards their purchases of cream and butter.

In the tobacco industry an international pool providing for a division of the field was effected. In September, 1902, the American Tobacco Company (the American trust) and the Imperial Tobacco Company (a British combination) entered into an agreement whereby the trade of the United States, Cuba, Porto Rico, Hawaii, and the Philippines, was reserved to the American Tobacco Company, and the trade of Great Britain to the Imperial Tobacco Company. A new concern, the BritishAmerican Tobacco Company, owned by the two companies above, was organized to handle the export business in the rest of the world. The earth, like Cæsar's Gaul, was divided into three parts.

International pools have also been established in the steel rail, thread, glass bottle, aluminum, gunpowder, calcium carbide, and meat industries.

4

Fifth Pools sometimes are merely selling agencies. The 5. manufacturers turn over their total output to a central selling

1 See p. 395.

2 Report of the Commissioner of Corporations on the Tobacco Industry, part I, pp. 166–176.