In the 1940 case Union Pacific Railroad Co. et al. v. United States et al., the U.S Supreme Court ruled in favor of the federal government, upholding its authority to regulate railroad rates under the Interstate Commerce Act (ICA). The dispute arose when several railway companies challenged an order by the Interstate Commerce Commission (ICC) that reduced freight rates on grain and grain products transported from Midwest states to Pacific ports for exportation. The railroads argued that these reductions were unjust and unreasonable, violating their rights under ICA and due process clause of Fifth Amendment as they would not be able to earn a fair return on their property used in transportation service. However, after reviewing evidence presented by ICC regarding cost studies, traffic conditions etc., Justice Stanley Reed delivered majority opinion stating that there was no constitutional violation as commission's decision was based on substantial evidence and within its power granted by Congress.

The dissenting opinion in the case of Union Pacific Railroad Co. et al. v. United States et al., argued that the Interstate Commerce Commission (ICC) did not have authority to approve or disapprove a voluntary agreement between railroads regarding division of joint rates unless it was proven that such an agreement would be detrimental to public interest, which was not demonstrated in this case. The dissent further contended that the ICC's decision interfered with private contractual rights without sufficient cause and violated principles of administrative law by making decisions based on unproven assumptions rather than concrete evidence presented during hearings. It also expressed concern about potential negative impacts on competition and efficiency within the railroad industry due to increased government regulation.