In the case of Detroit United Railway v. City of Detroit, 1912, the U.S Supreme Court was tasked with deciding on a dispute between the city and a railway company over franchise rights. The city had granted non-exclusive franchises to several street railway companies for limited periods under an ordinance that required consent from property owners along proposed routes. However, when one such franchise expired, it was transferred to another company without seeking new consents or paying compensation for increased value due to improvements made by previous operators. The court ruled in favor of the city stating that there were no constitutional violations as long as public authorities acted within their powers and did not infringe upon vested rights or contract obligations. It held that franchises are subject to regulation and control in accordance with local laws; therefore, they can be modified or terminated if deemed necessary for public welfare.

In the dissenting opinion for Detroit United Railway v. City of Detroit, it was argued that the city had a right to regulate fares on street railways operating within its limits. The dissenting justices believed that this authority stemmed from the state's police power and could be delegated to municipalities like Detroit. They disagreed with the majority's view that such regulation constituted an unconstitutional impairment of contracts between private parties (the railway company and its passengers). Instead, they saw fare regulation as a legitimate exercise of governmental power in pursuit of public welfare objectives, including ensuring affordable access to public transportation services. Furthermore, they contended that any contractual rights held by the railway company were subject to this regulatory authority since businesses using public streets are inherently subject to government control.