The European Commission has taken Italy to court for not collecting €1.34bn (£1bn) of fines for bursting through its milk quota.
Italy racked up a €2.3bn (£1.67bn) superlevy bill after exceeding its milk production limits every year between 1995 and 2009.
But, while the Italian government paid the cash to the EU, it did not collect all the money from the dairy companies or farmers.
The commission announced on Thursday it was referring Italy to the Court of Justice of the European Union for failing to fulfill its quota responsibilities, despite two earlier warnings.
“This undermines the quota regime and distorted competition with those producers who respected their quotas and those who have taken steps to pay their individual superlevy bills,” the commission’s statement said.
The milk quota regime will end on 1 April 2015, meaning the brakes on production will be taken off across Europe.
Countries who have been running close to quota, such as the Netherlands, Germany and Ireland, have been pulling back milk output to avoid a final year of fines.
The EU milk market observatory’s draft short-term outlook expects milk deliveries to fall 3% in the first quarter of 2015.
But, once restrictions come off, the commission predicts production to rise 2.5% between April and December..
This would make this year’s total production 1.2% higher than the previous twelve months.