In the 1904 case National Cotton Oil Company v. Texas, the U.S. Supreme Court upheld a Texas law that prohibited manufacturing and selling cottonseed oil that was not clearly labeled as such. The National Cotton Oil Company had been convicted under this law for selling adulterated cottonseed oil without proper labeling, which they argued violated their Fourteenth Amendment rights to due process and equal protection under the law. However, the court ruled in favor of Texas, stating that it is within a state's police power to enact laws protecting public health and preventing fraud - even if these laws interfere with private business interests or interstate commerce. This decision reinforced states' authority to regulate businesses operating within their borders for consumer safety purposes.

In the dissenting opinion for National Cotton Oil Company v. Texas, Justice Oliver Wendell Holmes Jr. argued that the majority's decision was based on an incorrect interpretation of the law and a misunderstanding of economic realities. He contended that there was no legal basis to consider cottonseed oil as a byproduct or waste product in this case, as it had significant commercial value and its production involved considerable labor and expense. Furthermore, he disagreed with the majority's view that selling cottonseed oil constituted an illegal monopoly under Texas law because it did not involve any attempt to control prices or restrict competition; rather, it simply represented normal business practice in response to market conditions. Therefore, he believed that punishing such behavior would discourage innovation and hinder economic development.