The U.S. Supreme Court case Oregon Railroad & Navigation Company v. Campbell, et al., constituting the Railroad Commission of Oregon in 1912 revolved around a dispute between the railroad company and the state commission over freight rates. The commission had ordered a reduction in rates that the railroad company believed was unjustly low and would not allow it to earn a fair return on its investment. The court ruled in favor of the railroad company, stating that while states have power to regulate commerce within their borders, they cannot do so at levels that prevent companies from earning reasonable profits or jeopardize interstate commerce by creating undue burdens on it. This decision reinforced principles established earlier by other cases such as Smyth v Ames (1898) which held that rate regulation must be just and reasonable both for public utilities and consumers.

In the dissenting opinion for Oregon Railroad & Navigation Company v. Campbell, et al., Justice Hughes argued that the court majority had overstepped its bounds by substituting their judgment for that of a state regulatory body. He contended that it was not within the purview of federal courts to determine whether rates set by state commissions were reasonable or not; rather, they should only intervene if such rates were so low as to be confiscatory and thus violate due process rights under the Fourteenth Amendment. In this case, he did not believe evidence showed these conditions met. Furthermore, he criticized his colleagues' reliance on comparisons with other states' railroad rates because each state has unique circumstances affecting transportation costs and market dynamics. Therefore, in his view, such comparisons could never provide an adequate basis for determining reasonableness or constitutionality of rate-setting decisions made by individual states.