WELLINGTON (Reuters) - New Zealand's Fonterra (FSF.NZ), the world's biggest dairy exporter, said it is in talks to resolve a dispute with Danone (PAR:BN) over a contamination scare involving a Fonterra ingredient used by the French food manufacturer.
The discussions follow a food safety scare in August, when Fonterra said it found a potentially fatal bacteria in one of its products, triggering recalls of infant milk formula and sports drinks in nine countries including China.
Danone-owned brands were affected, and the company issued a recall of its Dumex milk formula products containing the affected ingredient in China, while its Nutricia brand of milk formula was taken off supermarket shelves in New Zealand.
New Zealand's Ministry for Primary Industries later said tests showed the botulism scare had been a false alarm because whey protein concentrate made by Fonterra contained a less harmful bacteria.
"Fonterra confirms that the discussions remain ongoing but strongly denies any legal liability to Danone in relation to the recall," the company said in a statement.
Last week, the company, which controls nearly a third of the world dairy trade and generates around 7 percent of New Zealand's GDP, said it had made a NZ$14 million (7.2 million pounds) provision for the recall.
(Reporting by Naomi Tajitsu; Editing by Richard Pullin)