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U.S. Transportation Secretary Pete Buttigieg and DOT regulators are calling for increased scrutiny into corporate mergers. (Stefani Reynolds/Pool/Getty Images via Bloomberg News)

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U.S. regulators are engaging in a “real shift” in how they view competition in transportation industries and will make “vigorous” use of their authority to ensure airlines, railroads and others serve consumers, Secretary Pete Buttigieg said March 13.

“I am concerned about this broader pattern of concentration. We see it in airlines, we see it in ocean shipping and we see it in freight railroads,” Buttigieg said in an interview with Bloomberg News. “We are watching very carefully to see what’s happening and meanwhile, being as vigorous as we can with the tools that we have on the competition side.”

That changed approach is most apparent in the Department of Transportation’s decision last week to block JetBlue Airways Corp.’s takeover of Spirit Airlines Inc., he said. On the same day the Justice Department sued to block the deal in federal court, the transport agency said it would deny the airlines’ request for an exemption to operate as a single carrier while awaiting final approval of the deal. It is also investigating the takeover request to determine if it violates rules governing unfair and deceptive practices, and unfair competition, the agency said.

The department also has Southwest Airlines Co. “under a microscope” following the carrier’s meltdown during the holiday travel period in late December, Buttigieg said. The agency is seeking to ensure passengers whose flights were canceled are reimbursed and the airline operates with realistic schedules.

“I still want to see a little more,” Buttigieg said. “They have reported a large number of refunds and reimbursements, which of course, is what they should be doing. But I want to make sure that all of those questions are closed down.”

Southwest canceled more than 16,700 flights over a 10-day span in late December after a winter storm crippled its operations. Southwest has blamed a lack of preparation for winter operations and said it’s investing millions of dollars to prevent such mishaps in the future. It expects lost revenue and costs for reimbursements and refunds to be more than $1 billion.

The DOT on Jan. 25 announced it’s conducting an investigation to determine whether Southwest’s policies constituted an “unfair and deceptive practice,” which is prohibited under federal law.

Buttigieg said the agency is also considering whether to weigh in on proceedings before the Surface Transportation Board, the primary railroad regulator, and the Federal Maritime Commission, which oversees ocean shipping companies.

He declined to comment on Canadian Pacific Railway Ltd.’s proposed takeover of Kansas City Southern – currently pending before the railroad agency – though he acknowledged that “we’ve got our eye on it.”

The Justice Department is opposed to the merger, but the STB has sole regulatory power to approve railroad deals. The STB is expected to make a decision in March.

— With assistance from Thomas Black.

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