Railroads Control Competition
Explain how Gilded Age railroad companies used rebates, pools, and rate fixing to crush competitors and control markets before government regulation in Grade 8 history.
Key Concepts
Powerful railroad companies wanted to eliminate competition to control the market. They used secret and unfair business practices to drive rivals out of business and increase their own profits.
Railroads offered rebates , or secret discounts, to their biggest customers, making it hard for smaller shippers to compete. Companies also formed pools , which were secret agreements to fix prices at a high level. These tactics left farmers and small businesses with no choice but to pay unfairly high shipping costs.
Common Questions
How did railroads eliminate competition?
Railroad companies used secret rebates to give preferred shippers lower rates, entered pools to fix prices, and drove smaller railroads out of business through predatory pricing.
What were railroad pools?
Railroad pools were secret agreements among competing railroads to divide territories and fix prices at artificially high levels, eliminating price competition at customers' expense.
How did railroad monopolies harm farmers and small businesses?
Without competition, railroads could charge whatever rates they wanted, often charging farmers more to ship grain short distances than wealthy businesses paid for long hauls.