The Reagan v. Mercantile Trust Company case in 1893 revolved around the constitutionality of a Texas law that regulated railroad freight rates. The state's Railroad Commission, headed by John H. Reagan, set maximum charges for transporting goods and passengers within Texas borders. However, several railroads represented by the Mercantile Trust Company challenged this law on grounds that it violated their Fourteenth Amendment rights to due process and equal protection under the Constitution because it did not allow them to charge what they deemed fair prices for their services. The U.S Supreme Court ruled against Reagan and upheld the railroads' challenge, stating that while states have power to regulate businesses serving public interests such as railroads; any regulation must be reasonable and cannot result in confiscation of property or violation of constitutional rights - which includes earning a fair return on investment for providing these services. This ruling was significant as it established limits on state regulatory powers over private industries serving public interests; emphasizing balance between protecting consumer welfare through price controls versus safeguarding business owners' constitutional rights to earn reasonable profits from their investments.

In the dissenting opinion for Reagan v. Mercantile Trust Company, Justice Brewer argued that the Texas legislature had no authority to reduce rates set by private railroad companies without providing compensation. He contended that such action violated the Fourteenth Amendment's due process clause and constituted a taking of property without just compensation. Brewer believed that while states have power to regulate industries within their borders, they cannot arbitrarily interfere with private contracts or destroy value in privately owned businesses under guise of regulation. He maintained that railroads were not public utilities but rather corporations engaged in commerce and thus entitled to protection from arbitrary state interference under both federal constitution and common law principles protecting contractual rights.