ABSTRACT
European Union (EU) competition law concerns regulation of competitive markets in the EU, particularly to ensure that firms do not abuse of market power. It is largely similar to the US antitrust law. The four main policy areas of EU competition law include: cartels, market dominance, M&A, and state aid. Transaction cost theory proposes an alternative explanation for the existence of multi-business firms. In neoclassical economic theory, activities in two different businesses should be assigned to two independent firms, because any necessary coordination between the two firms could take place through the market at a lower cost. Governance mechanisms, such as a board of directors, monitoring by owners, executive compensation ceilings, or markets for corporate control, can limit managerial tendencies to over-diversify. In modern corporations, which are characterized by the separation of ownership and managerial control, managers are decision-making specialists who act on behalf of the firm's owners.
