In the 1938 case of Tennessee Electric Power Co. et al. v. Tennessee Valley Authority et al., private power companies in the state of Tennessee challenged the constitutionality of the federal government's creation and operation of the Tennessee Valley Authority (TVA), a federally owned corporation that generated and sold electricity in competition with them. The plaintiffs argued that this was an overreach by Congress, violating both their rights under due process clause as well as exceeding its commerce powers under Article I, Section 8, Clause 3 of U.S Constitution. The Supreme Court ruled unanimously against these claims, upholding TVA's legitimacy on grounds that it was part and parcel to a larger scheme for flood control and navigation improvements - purposes clearly within Congressional authority over navigable waters. Furthermore, they held there were no constitutional prohibitions against Federal Government engaging in commercial activities such as selling surplus power produced from these projects.

In the dissenting opinion of the case Tennessee Electric Power Co. et al. v. Tennessee Valley Authority et al., Justice McReynolds expressed his concern that the majority's decision would allow for an overreach of federal power, undermining state rights and private enterprise. He argued that there was no constitutional basis for allowing a government entity like TVA to compete with private businesses in selling electricity generated from public works projects, as it violated principles of free competition and limited government intervention in economic affairs. Furthermore, he contended that this interpretation could lead to unchecked expansion of federal authority into areas traditionally regulated by states or left to private industry, which he believed was not intended under the Commerce Clause or any other provision within Constitution.