In the case of Pacific Gas & Electric Co. v. Securities & Exchange Commission, 1944, the Supreme Court ruled on whether or not a holding company could be forced to divest itself of its public utility companies under the Public Utility Holding Company Act (PUHCA) of 1935. The court held that it was within Congress's power to regulate interstate commerce and thus enforce such divestiture if it found that doing so would simplify the structure and operations of said holding company for better regulation and protection against financial risk. In this particular case, Pacific Gas & Electric was ordered by SEC to cease control over certain public utilities as their complex structure made effective federal regulation difficult. The decision affirmed Congress’s authority in regulating interstate commerce through legislation like PUHCA.

In the dissenting opinion for Pacific Gas & Electric Co. v. Securities & Exchange Commission, Justice Frankfurter disagreed with the majority's interpretation of the Public Utility Holding Company Act of 1935. He argued that Congress intended to give broad authority to the SEC in regulating utility holding companies and their subsidiaries, including those involved in non-utility businesses such as real estate or insurance. According to him, this was necessary because these non-utility activities could potentially harm investors and consumers by diverting resources away from essential utility services or creating conflicts of interest within management. Therefore, he believed that it was not only permissible but also required for SEC to order divestment from unrelated businesses if they found it necessary for public protection.