Authorities have recalled up to 1000 tonnes of dairy products across New Zealand and seven other countries after Fonterra announced tests had found a bacterium that could cause botulism.
Fonterra is likely to face compensation claims from companies it supplied with tainted whey, says a law professor.
Eight companies have been identified as receiving the product, which has potentially contaminated thousands of cans of infant formula.
Ursula Cheer, a professor at the University of Canterbury, said compensation claims couldbe made over breach of contract for supplying faulty product. "I imagine they [Fonterra] are worrying about it right now. They are probably trying to settle it [out of court]."
Cheer said it was hard to quantify how much could be paid out and the public might never know unless it got to court. She said Fonterra's customers could have the potential to claim for pecuniary losses as well as loss of reputation.
If any babies were proved to have been sick from the contamination, the damages claims could also increase.
Bill Hodge, an Auckland University law professor, said in his view any consumer or the parents of any baby who contracted botulism would be able to sue, even in New Zealand.
"The first thing we think of in New Zealand is ACC."
ACC generally prevents anyone suing based on it being an accident.
But Hodge said botulism was a disease, not an accident, and any infection could be seen as negligent, which could result in consumers or the parents bringing action.
He said overseas legal action would depend on the laws of that country but a previous contamination case in China showed it was not easy for people to take legal action.
"The children who died from melamine-laced Sanlu product would have a strong case for compensation - but I'm not sure that went very far."
In May 2010, Hong Kong's Small Claims Tribunal rejected a compensation bid by four mainland Chinese parents against a Fonterra company after their children were poisoned in the melamine milk powder scandal in 2008.
