In the 1946 case American Power & Light Co. v. Securities & Exchange Commission, the U.S Supreme Court upheld the constitutionality of an order by the Securities and Exchange Commission (SEC) that required a public utility holding company to divest itself of certain assets under Section 11(b)(1) of The Public Utility Holding Company Act of 1935. This act was designed to eliminate unfair practices and other abuses by electricity holding companies through federal regulation and oversight. The court ruled in favor of SEC stating that it had not exceeded its authority when ordering American Power & Light Co., which controlled utilities in multiple states, to limit its operations geographically for effective regulation and competition purposes.

The dissenting opinion in the case of American Power & Light Co. v. Securities & Exchange Commission, 1946 argued that the majority's decision to uphold the SEC's order for corporate simplification was an overreach of federal power and a violation of states' rights. The dissenters believed that Congress did not intend for such broad powers to be granted under the Public Utility Holding Company Act (PUHCA) and suggested that it should only apply when there is clear evidence of abuse or fraud by holding companies. They also expressed concern about potential harm caused by forced divestitures, including loss of efficiency and economies of scale, which could negatively impact consumers as well as shareholders. Furthermore, they questioned whether PUHCA gave adequate consideration to state regulatory schemes already in place for public utilities.