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UPDATE 1-U.S. DOJ says Canadian National bid for Kansas City Southern poses greater risk to competition

(Adds Canadian Pacific’s response)

May 14 (Reuters) - The U.S. Department of Justice said on Friday that Canadian National Railway Co’s bid for U.S. railway operator Kansas City Southern appears to pose greater risks to competition than a rival agreement with Canadian Pacific Railway.

The development comes as Kansas City on Thursday accepted Canadian National’s $33.6 billion acquisition offer, upending the $29 billion deal with Canadian Pacific.

"A CN-KCS transaction poses additional dangers to competition stemming from the potential elimination of direct, 'parallel' competition on routes served by both railroads, for example between Baton Rouge and New Orleans," the DOJ said in a filing here with the U.S. Surface Transportation Board.

Canadian National did not immediately respond to a Reuters request for comment.

Canadian Pacific said the company remained confident its friendly deal with the U.S. railroad was “the only viable merger”. It has five business days to make a new offer for Kansas City, and a bidding war could ensue if the company tables a new bid.

Both companies are seeking to create a North American railway spanning the United States, Mexico and Canada. (Reporting by Sanjana Shivdas in Bengaluru; Editing by Sriraj Kalluvila and Shailesh Kuber)

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