ABSTRACT
The main objective of the European Union (EU) is to enhance the allocational efficiency of the economies of the member states by removing barriers to the movement of goods, services and production factors. Policies have been agreed upon to make the European market, once created, function properly. In this chapter, the author examines some of the basic theoretical principles about government intervention in European markets. He describes the EU regime in matters of allocation policies. To ensure the good functioning of the internal market, two types of policy are needed: competition and harmonisation. The author also describes the economic rationale of the EU involvement with competition and the specific forms in which competition policy has been elaborated over the past. In the 1960s and 1970s, the internal market remained incomplete. In the 1980s and early 1990s, a new programme succeeded in bringing about the complete abolition of all controls at internal borders on goods, services, workers and capital.
