The Irish Creamery Milk Suppliers Association has sought legal opinion on the rules banning farmers from getting EU direct payments when they submit incorrect forms for payments.
The ICMSA president, Mr Pat O'Rourke, said his organisation might mount a legal challenge to the rules unless there was a fundamental change by the EU and the Minister for Agriculture, Mr Walsh.
He said the rules, which provide for penalties of up to two years loss of premium where a farmer makes a mistake, were unconstitutional.
"There is growing anger among farmers in the way they are being treated by the Department as if they were all involved in fraud . . . The rules make no real distinction between mistakes, carelessness or downright fraud."