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Of course it's outrageous that major Canadian grocery chains and bakeries conspired to jack up the price of sliced bread.

Bread is a staple and a key source of carbohydrates for many Canadians at all income levels.

Let's assume the scheme, which is being investigated by the federal Competition Bureau, added 25 cents to the price of a loaf of bread. If your family buys two loaves a week, you might have paid an extra $25 a year.

That's nothing to sniff at, and it went on for 14 years.

But if you really want to get riled up, head over to the dairy aisle or the meat counter. There, producers have been brazenly fixing prices on dozens of essential food items since the 1970s – all with the blessing of Ottawa and the provinces.

We are talking about the supply-managed dairy, poultry and egg sectors, in which farmers get to decide what they'll be paid for their products. Chicken breasts, milk, cheese, yogurt and a host of other products containing these essential ingredients are all much more expensive than they should be.

The financial pain of supply management hits the poorest families the hardest. Low-income households with kids pay an average of $466 to $592 a year more for their groceries as a direct result of inflated prices paid to farmers, according to a recent study by three agricultural economists at the University of Manitoba. For the poorest families, the regime amounts to an "implicit" 2.3-per-cent tax on their income.

"The current supply management system imposes large financial burdens on Canadian consumers, and these burdens are regressively distributed along the income spectrum," the study concluded.

And that doesn't even reflect the extra cost of dining out, which the researchers did not include in what they characterized as "conservative" estimates.

On the other hand, the penalty imposed on Canadians because of the bread-fixing scheme might tally up to a few hundred million dollars. Loblaw Cos. Ltd., which has admitted its role in setting prices, is offering consumers $25 gift cards as part of a payout that could cost the company $150-million.

Compare that with the supply-management tax: The Organization for Economic Co-operation and Development has calculated that Canadian dairy consumers alone spent an average of $2.6-billion more a year than they should have in the decade to 2011. That's because prices Canadian dairy farmers get for their milk are consistently about 30 per cent higher than the world price.

Not only is this dubious social policy endorsed by Ottawa, but all three parties in the House of Commons and most provinces have repeatedly vowed to defend the regime against various trade challenges, including from the United States in the continuing renegotiation of the North American free-trade agreement.

The bread probe is a costly and embarrassing blow to Loblaw and its parent, George Weston Ltd. But things could have been a whole lot stickier. Last month, the Competition Bureau quietly closed a 3½-year investigation into allegations that Loblaw was abusing its dominant position to squeeze suppliers. The federal agency, which said there was insufficient evidence, has been investigating the pricing practices of Loblaw – Canada's largest grocery chain – since the company swallowed Shoppers Drug Mart in 2014.

For decades, food manufacturers and independent retailers have complained that the big Canadian chains exploit their market clout to extract deep discounts, high fees and other concessions. Loblaw has been the most frequent target of their gripes, blamed for using aggressive pricing policies, including unilateral handling fees and other charges.

Competition commissioner John Pecman expressed frustration last year about the slow pace of the Loblaw probe, acknowledging that many suppliers aren't co-operating for fear of "retaliation" by the retailer.

It's pretty obvious that concentration in Canada's grocery industry gives the dominant chains a lot of market power. The top five retailers – Loblaw, Empire, Metro, Wal-Mart and Costco – control more than 80 per cent of the market. Loblaw alone – with more than 2,400 stores and 70-million square feet of retail space – has 30 per cent of the market.

In spite of years of looking, regulators have found no hard evidence of anti-competitive behaviour, except in the bakery aisle.

But if Ottawa is really serious about rooting out price-fixing, they know exactly where to look next – down on the farm.

Follow Barrie McKenna on Twitter: @barriemckennaOpens in a new window

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