POOLING (from pool, from Fr. poule. pool, stakes, lien. from ML. polio, hen. from Lat. put /us, young animal, chicken). A division of busi ness or of the proceeds of business among other wise competing carriers or other parties, intended to minimize the effects of competition by main taining rates. Pools may be divided into four classes; a dirision of traffic may be either (1) a division of the field. where the business of a particular territory is assigned to each com petitor. or (2) a tonnage pool, where a certain percentage of the competitive business is as signed to each. A division of rerenne may be either a (3) or (4) net money pool, according to whether it is based upon gross or net receipts. A net money pool almost neces sarily involves a system of joint accounting, and is therefore a close form of combination.
Railway pooling became a matter of impor tance in England about 1550, but its origin is obscure. The first railway pools in the United States were probably among the New England railways, but it was in the West that pooling first became a matter of public importance. Both freight and passenger traffic between Chi cago and Omaha were pooled in and the arrangement remained in force, with hut one short interruption. for 17 years. the pool being merged in 1S54 in the Western Freight Associ ation. The principal roads carrying anthracite coal to the Atlantic seaboard. which also owned about 75 per cent. of the anthracite coal fields. had an effective pooling arrangement from 1572 until In 1573 the roads from At lanta to the coast formed a pool out of whieh afterwards grew the Southern Railway and Steamship Association. The lines from Chi cago and Milwaukee to Saint Paul arranged a money pool for both freight and passenger traf fic in 1874. During the next few years numer ous pools were organized, until tiny covered nearly every part of the country.
Railway freight pooling was forbidden and made a misdemeanor by the interstate Commerce Act passed in 1887. but the wisdom of this pro hibition was and has continued to be a much mooted question. (See INTERSTATE COMMERCE Act.) :Most students of the subject, both prac tical and theoretical, favor the legalization of pooling under governmental supervision. Pool ing prevents discrimination and is conducive to stability of rates, which is generally considered more important than absolute lower rates. It is argued that when the division of competitive traffic is as certain as that of non-competitive traffic both will lee treated without discrimina tion, for there will be no reason for favoring competitive points; through traffic will then be made to bear its just share of the cost of trans portation.
Upon the passage of the Interstate Commerce Act existing pooling contracts were annulled, but the attempt to prevent pooling has not been al together successful. Traffic associations have
endeavored to continue the division of traffic without resorting to the usual pooling machin ery. There is abundant evidence of a physical division of cotton freight from Memphis and other interior points to the seaboard; indeed, this pool has been sustained by the Supreme Court of Tennessee. It does not fix rates, but all the roads concerned accept the lowest rate to Liverpool prevailing on any given day. There is said to be a somewhat similar division of the fruit traffic from southern California. The so called Buffalo grain pool, which was investi gated by the Interstate Commerce Commission in 1900, was intended to divide the grain traffic from Buffalo to New York and to maintain a rate of 4 cents a bushel.
At common law, the American courts have usually held pooling agreements to he contracts in restraint of trade, and against public policy. Pools have therefore been extra-legal agreements not enforceable by the courts. but dependent upon the good faith of the partie4, and hence lacking in permanence. In England the courts look upon pooling with much less disfavor than in the 'United States; while on the Continent pooling is regarded with such favor that the Government railways of Prussia. Austria, and other countries maintain pooling arrangements with competing water routes.
Pooling is not confined to transportation lines. The Western Elevating Association is an organ ization of grain elevators at Buffalo which estab lishes uniform rates for elevating and storing grain, collects the earnings, and after deducting* expenses. distributes the remainder to the par ticipating elevators ill certain specified propor tions. ba...ed upon their working capacity and the business they control. Manufacturing con cerns sometimes form pools for the purpose of keeping up prices by limiting production.
The term pool. or pooling. is applied also to various other forms of combination for concerted action. In a Wall Street or stock pool stockhold ers of a company assign their stock to a firm of bankers or brokers to be sold within a given time, usually at not less than a stated price, otherwise the stock is to be returned to the holders, the profits, if any, being shared by all alike. Receivers of farm produce in the Cincinnati market have formed 'pools' for econ omy in handling the goods, fewer salesmen being required by this method.
Consult: Cooley, Popular and Legal Views of Tragic Pooling (Chicago, 1884) ; Dadley, Rail road Transportation (New York, 1885) ; Seligman, "Railway Tariffs and the Interstate Com merce Law." Political Schnee Quarterly Hadley, "Prohibition of Railway Pools," Quar terly Journal of Economies (January, 1890) ; Newcomb, Railway Economies (Philadelphia, 1898) : Report of the Industrial Commission, es pecially vol. Nix.