In the case of Detroit and Mackinac Railway Company v. Michigan Railroad Commission in 1914, the Supreme Court ruled on a dispute between a railway company and state regulatory body. The Michigan Railroad Commission had ordered the Detroit and Mackinac Railway Company to install an interlocker at one of its crossings, which was contested by the railway company as unnecessary due to low traffic volume. The court held that while states have authority over local railroads for safety purposes, this power is not absolute or arbitrary; it must be reasonable and not interfere with interstate commerce. In this instance, they found that installing an expensive interlocker where there were only two trains crossing per day was unreasonable. Therefore, they concluded that such order from commission constituted undue burden on interstate commerce thus violating federal law.

In the dissenting opinion for Detroit and Mackinac Railway Company v. Michigan Railroad Commission, Justice Holmes argued that the majority's decision was based on a misinterpretation of the law. He contended that it was not within the purview of courts to determine whether or not a rate set by a state commission is reasonable; rather, this responsibility lies with administrative bodies like railroad commissions. According to him, if there were any issues regarding rates being too low or confiscatory in nature, such matters should be addressed through legislative action instead of judicial intervention. Furthermore, he disagreed with the majority's view that railroads are entitled to earn profits from every single part of their operations - an idea which he believed contradicted established principles governing public utilities regulation.