In the case of Henderson Water Company v. Corporation Commission of North Carolina et al., 1925, the Supreme Court was asked to review a decision by the state's Corporation Commission that ordered a reduction in water rates charged by Henderson Water Company. The company argued that this order violated its constitutional rights under the Fourteenth Amendment, specifically its right to due process and equal protection under law. It claimed that it had been denied fair return on its property investment because of this rate reduction. The Supreme Court disagreed with these arguments and upheld the commission's decision. The court ruled that states have broad powers to regulate public utilities within their borders for public welfare purposes, including setting reasonable rates for services provided by such utilities. Furthermore, it held that courts should defer to regulatory agencies' expertise in determining what constitutes 'reasonable' rates unless there is clear evidence of arbitrary or discriminatory action. Therefore, while acknowledging businesses’ rights against confiscatory regulation which would deny them just compensation for use of their property (a principle established in earlier cases), Justice Sutherland writing for majority stated: “the basis of calculation is necessarily one largely within legislative discretion.” This meant regulators could consider factors beyond simple cost recovery when setting utility prices.

In the dissenting opinion for Henderson Water Company v. Corporation Commission of North Carolina, it was argued that the majority's decision to uphold a state law requiring privately owned utilities to obtain approval from a public commission before increasing rates violated constitutional protections against government interference in private contracts. The dissenting justices contended that this ruling undermined property rights and threatened economic stability by discouraging investment in utility infrastructure. They also criticized the majority for failing to adequately consider whether such regulations were necessary or appropriate given existing market conditions and consumer protections. Furthermore, they questioned whether the state had demonstrated a compelling interest justifying its intrusion into private business affairs, suggesting instead that political considerations may have unduly influenced its actions.