DAIRY giant Murray Goulburn Co-operative is being accused of spreading "misleading and deceptive" information about a rival milk company.

United Dairy Power is taking its battle to the Federal Court after allegedly discovering MG had spread false information about UDP's financial situation.

Court documents lodged yesterday by UDP's legal team to the court claim MG contravened the Competition and Consumer Act by spreading "injurious falsehoods".

According to the claim, MG employees told people its rival was "experiencing financial difficulties", it was unable to pay milk suppliers and would close in the near future.

UDP is seeking damages and to restrain MG employees from making further statements.

A hearing is scheduled for July 5 at 2.15pm.

MG is owned by dairy farmers and processes more than 35 per cent of Australia's milk supply.

UDP is a privately-owned dairy company and when it announced its milk price for the coming season last week said it have been campaigning in Victoria and South Australia to recruit new milkers.

MG spokesman Robert Poole said the company would not comment on the matter as it was before the court next week.