The Commerce Commission has received a complaint relating to cattle semen supplied by the Livestock Improvement Corporation.
About 3000 female offspring of LIC's dairy breeding bull Matrix have turned out to be hairy, heat intolerant, and poor milk producers.
LIC agreed to pay dairy farmers the costs of inseminations and semen.
But farmers at a meeting in Taranaki last week said they wanted to proceed with legal action to recoup the lost earning potential of the calves.
The Commerce Commission says it received the complaint last month and is assessing the information to decide whether it will investigate.
Meanwhile, Federated Farmers says it has to step back because it could now become a commercial dispute.