Fonterra confirms Danone has launched lawsuit against it

New Zealand dairy company Fonterra Co-operative Group confirmed Thursday that French food group Danone has formally initiated legal proceedings against Fonterra following a contamination scare that sparked the global recall of infant milk formula.

"Fonterra has been in ongoing commercial discussions with Danone and is disappointed that they have resulted in legal action," Fonterra said in a statement e-mailed to the Global Times Thursday.

Danone said Wednesday that it would sue Fonterra and stop buying products from the New Zealand firm.

The world's largest yogurt maker did not say how much money it was seeking, but it has previously said it wanted full compensation for what it says were 350 million euros ($476 million) in lost sales following the recall of the company's Dumex and Karicare infant formula products.

Danone is one of Fonterra's biggest milk powder customers, and the move will cause a big loss to Fonterra, Yan Qiang, an industry analyst with Beijing-based Hejun Consulting, told the Global Times Thursday.

Fonterra, which said Thursday it would contest the suit "vigorously," declined to provide details about its sales to the French firm.

In August 2013, Fonterra said it had found a potentially fatal ingredient in a range of products sold by multinational companies. After recalls were issued across nine countries and regions including China, the scare turned out to be a false alarm because the ingredient was found to contain a less harmful bacteria.

In a statement, Danone said it was starting proceedings in the New Zealand High Court against the world's largest dairy processor, which supplies a range of ingredients to the firm. Danone would also start arbitration proceedings in Singapore to obtain compensation.

The company said it was also terminating its supply contract with Fonterra and would make any further collaboration contingent on a commitment by Fonterra to full transparency and compliance with Danone's food safety procedures.

"This affair illustrates serious failings on Fonterra's part in applying the quality standards required in the food industry," Danone said.

Danone said it would source products from other global suppliers.

Danone has been widely building up raw milk supply bases around the world these years, making it possible to cancel the supply contracts with Fonterra, said Yan from Hejun Consulting said.

Fonterra has denied any legal liability to Danone regarding the recall.