suitable authority to perform the proposed service and has served shipper in the past, its service has not been satisfactory. Hayes has attempted to serve the shipper both as part of its peddle run operation and by spotting empty trailers at the Elkton plant. Neither method has provided the dependable, responsive service which Ardco requires. Protestant's peddle run drivers have been unable to perform a consistent daily pickup service at Elkton prior to the 3:30 p.m. closing hour. Evidence was introduced at hearing which indicated that during a representative 5-month period, Hayes either failed to respond to requests for pickups, or made the pickups the following day, on one out of every three occasions. Although protestant has stationed empty equipment at the Elkton plant, it refuses to perform a daily pickup service unless the trailer is loaded to at least one-half of its full capacity.

Dissatisfied with this inconsistent and unreliable service and faced with the urgent need to move its products as quickly as possible, Ardco has used other carriers, including applicant, to handle its northeastern traffic. PHE regularly serves the Elkton plant on shipments destined to other points by interlining at its Memphis and Nashville, TN, terminals, It generally stations two trailers at Elkton to be loaded by the shipper, one consigned to Memphis, the other to Nashville. PHE provides a daily pickup of these trailers without regard to the volume of freight loaded on them. However, applicant's existing operating authority between Elkton and Nashville is specifically restricted against the transportation of traffic originating at points in Kentucky and destined to points in the Northeast. Thus, in order to handle this traffic, PHE must transport the shipments to its Memphis terminal for interchange, a routing involving approximately 400 miles of circuity.2

The majority in its prior report concluded that Hayes has been providing an adequate service to Ardco and that Ardco should bear the responsibility for arranging its distribution operation in a manner more acceptable to the existing carriers, citing Gra-Bell Truck Line, Inc., Ext.-Coloma, 115 M.C.C. 872, 880 (1975). We disagree with each of these conclusions. We read the record as establishing a valid transportation need for the expedited transportation of primarily less-than-truckload (LTL) shipments. In our view, Hayes has been unable to satisfy shipper's reasonable transportation needs. Its refusal to guarantee Ardco a daily pickup

It is clear from the evidence of record that applicant has on past occasions interchanged shipper's northeastern traffic at Nashville in contravention of the restriction in its authority. This conduct will be addressed in our discussion concerning applicant's fitness.

of LTL consignments loaded on the trailers spotted at Elkton, without corresponding assurances that the trailers are at least onehalf full, is incompatible with shipper's policy of rapid response to customer orders. Moreover, it is clear that Hayes has been unable to perform consistent pickups at Elkton with its peddle run operation before the 3:30 p.m. deadline.

We regard Ardco's transportation needs as both legitimate and reasonable. We perceive nothing unusual in Ardco's reluctance to institute an entire second shift for its shipping department for only a short period of service (from 3:30 p.m. to 5 p.m.) in order to accommodate Hayes' preferred pickup hours. Such an economic burden to Ardco plainly goes beyond the obligations of a shipper suggested in the Gra-Bell, supra, decision. As has been stated repeatedly, the principle established in Gra-Bell, supra, is intended to prevent "manufactured" cases based on arbitrary or capricious shipper demands for service. Such cases are exceedingly rare, and this is not one of them. On the contrary, the record manifests a real need for an expedited, daily pickup service which applicant has been providing under its existing restricted authority, but which protestant has been unwilling to perform. It is not the Commission's function to "second guess" the shipper's business decisions with respect to shipper practices and distribution patterns. Accordingly, we find that a need for applicant's proposed service has been demonstrated.

Applicant's fitness.-Having determined that there is a need for the proposed service, we now turn to the question of whether the applicant has carried its burden of proving that it is fit, willing, and able to provide that service.

A finding of fitness to conduct proposed operations is a statutory prerequisite to a grant of authority under section 207(a) of the Interstate Commerce Act. It is well established that the determination of fitness is an independent inquiry which is not influenced or altered by any corresponding showing of public need for the applicant's service. Watkins Motor Lines, Inc., Ext.-To Four States, 120 M.C.C. 92, 101 (1974), and Metler Hauling &

'See Southwest Equipment Rental, Inc., Ext.-South Gate, 128 M.C.C. 731, 736 (1978); Pacific Intermountain Exp. Co.-Off-Route, 126 M.C.C. 866, 871 (1977); Superior Trucking Co., Inc., Ext. Agric. Machinery, 126 M.C.C. 292, 299 (1977); Coast Ref. Trucking Co., Inc., Ext.-Bakery Prod., 125 M.C.E. 292, 297 (1976); and Johncox Extension-Frozen Merchandise, 121 M.C.C. 9, 13 (1975).

'Since an applicant's fitness is a threshold question to be decided in any application for new authority and it is the applicant's burden to demonstrate its fitness, we do not view the Bureau's failure to file a petition for reconsideration to the prior report of this division to be significant, nor does it preclude our reconsideration of the issue.

Rigging Ext.-Loudon County, Tenn., 117 M.C.C. 557, 559-60 (1972). The issue of fitness is to be resolved on the particular facts and circumstances presented in each proceeding, Tennessee Cartage Co., Inc., Extension-Georgia, 128 M.C.C. 819, 821 (1978), and Distributors Service Co., Extension-Foods, 118 M.C.C. 322, 329 (1973). The determination as to whether an applicant has sustained its burden of establishing its fitness must be made upon a full consideration of the nature and extent of the violations committed by applicant, the mitigating circumstances, whether applicant's conduct represents a flagrant and persistent disregard of the provisions of the act and of its certificates, whether applicant has made a sincere effort to correct past mistakes, and whether applicant is willing and able to comport in the future with the statute and the applicable rules and regulations of the Commission, Miller Transfer and Rigging Co., Ext.-Metal Lathes, 125 M.C.C. 538, 543-44 (1976).

The evidence adduced at hearing by the Bureau was stipulated to by PHE and centered on four basic areas of misconduct on the part of applicant. These are: (1) the failure to remit c.o.d. payments within 10 days, (2) delay in processing loss and damage claims, (3) engaging in transportation beyond the scope of its authority, and (4) expending excessive sums of money in entertaining shippers and consignees.

(1) C.O.D. Remittances.

The pertinent portion of the regulation on the remittance of c.o.d. collections is found at 49 CFR 1052.3:

Every common carrier of property subject to Part II of the Interstate Commerce Act, except as otherwise provided in $1052.1, shall remit each c.o.d. collection directly to the consignor or other person designated by the consignor as payee promptly and within ten (10) days after delivery of the c.o.d. shipment to the consignee.

Applicant's history of the noncompliance with this provision is long and consistent. In 1975, an investigation into the operations of PHE disclosed 151 instances in which the c.o.d. remittance was not forwarded to the payee within the required 10-day period. The excess delays in remitting the amounts varied from a low of 2 days to a high of 116 days. The total amount of the delinquent c.o.d. remittances involved in the 151 shipments was $54,965.25. In 1972, a compliance report alleged that on 155 shipments applicant had failed timely to remit c.o.d. collections. As a result of this report, a

criminal information was filed against applicant in Federal district court which ultimately resulted in PHE pleading guilty to eight specific c.o.d. violations and paying a fine of $2,900. Another compliance report made in 1968 alleged that applicant had not complied with the c.o.d. regulations in over 50 instances. Other compliance reports or investigations in 1965, 1960, and 1948 noted the same type of misconduct by applicant.

(2) Loss and Damage Claims.

Section 1005.5 of the Commission's Regulations (49 CFR 1005.5) provides:

Each carrier subject to the Interstate Commerce Act which receives a written claim for loss or damage to baggage or for loss, damage, injury, or delay to property transported shall pay, decline, or make firm compromise settlement offer in writing to the claimant within 120 days after receipt of the claim by the carrier; Provided, however, That, if the claim cannot be processed and disposed of within 120 days after the receipt thereof, the carrier shall at that time and at the expiration of each succeeding 60-day period while the claim remains pending, advise the claimant in writing of the status of the claim and the reason for the delay in making final disposition thereof and it shall retain a copy of such advice to the claimant in its claim file thereon.

Again, the evidence stipulated to by the Bureau and applicant revealed persistent noncompliance with this provision by applicant. The Bureau's investigation of applicant in 1975, noted above, revealed numerous loss and damage claims filed by shippers, receivers, and interline carriers which had been approved for payment but remained unpaid beyond the 120-day period. Moreover, in most instances, PHE had failed to notify the claimant in writing explaining the reasons for its delay in responding to the claim as required by the regulation. An audit made in 1974 of PHE's accounting records disclosed another 82 claims outstanding, some of which were approximately 6 years overdue. PHE's apparent policy was not to pay in claim, even though approved for payment, unless a request from the claimant was received.

(3) Operating Rights Violations.

Applicant has also been shown repeatedly to have engaged in unauthorized operations. The Bureau's 1975 investigation discovered some 336 instances where PHE has transported traffic beyond the scope of its operating rights. A majority of these violations were shipments which originated at points in Kentucky, some at the Ardco plant in Elkton, and were transported by applicant to its Nashville terminal where they were interlined with

other carriers for deliveries in various Northeastern States. The authority under which applicant handled this traffic contained a restriction against the transportation of shipments originating at points in Kentucky and destined to points in the Northeastern portion of the United States. Applicant's operations, therefore, were in direct violation of this restriction. Other unlawful transportation activities detected by the Bureau involved the performance of operations for which PHE held no authority. A compliance report in 1972 alleged another 83 instances of unauthorized transportation service.

(4) Excessive Entertainment Expenditures.

Section 1004.2 of the Commission's regulations (49 CFR 1004.2) provides in pertinent part:

(d) Any person, whether carrier, shipper, consignee, or broker, or any officer, employee, agent, or representative thereof, who shall knowingly offer, grant, or give, or solicit, accept, or receive any rebate, concession, or discrimination in violation of any provision of the Act, is in violation of the law. Thus, a gift by the carrier to a shipper of anything of substantial intrinsic value would be deemed a violation of the law and would subject both the carrier and the receipient to the penalties therein provided.

(f) (3) Gifts of services or articles of substantial value to particular shippers or their representatives are considered violations of the law. For example, transportation of shipper representatives in carrier-owned aircraft or automobiles to resorts for recreational weekends or similar excursions are so regarded.

The stipulation entered into between applicant and the Bureau detailed numerous recreational trips, parties, and gifts which PHE provided for representatives of shippers. In 1974 and 1975, PHE organized and paid for four hunting trips in which it entertained actual and potential shipper representatives and its own personnel. The average cost for each person per trip amounted to $96.50. Also in 1974, PHE spent $870.84 on gifts for a wedding of the daughter of a shipper's traffic manager. However, the most excessive expense involved a 1974 fishing excursion to Florida for 42 people, including 31 shipper officials. PHE spent $10,218.29 or an average of $243.29 for each person on the trip. Two other fishing trips in 1974 were also provided for shipper representatives by PHE. A 1974 Christmas party for 36 employees and spouses of one of applicant's shippercustomers was given. Applicant spent $2,145.24 on their entertainment.