Australian soccer's peak body says it was protecting the image of the game by lobbying to remove a Football Australia (FA) logo from Adelaide United's playing strip.
Adelaide United players were to have worn a logo of FA, headed by businessman Clive Palmer, on their shirts in Wednesday night's Asian Champions League fixture at Hindmarsh Stadium.
But Football Federation Australia (FFA) asked Asian authorities to review the decision to permit the logo.
The Asian Football Confederation (AFC) subsequently ordered the logo be removed, prompting the FA to threaten legal action.
"This is a case of third party interference in a contract," Palmer said in a statement on Wednesday.
"And they (the FFA) should be held accountable as to why they have breached Australian contract law."
FA director Clive Mensink said preliminary investigations had started into legal action against the FFA over its role in breaking the sponsorship contract with Adelaide United.
"Adelaide was the only team in its AFC Champions League group without a sponsor," Mensink said in a statement.
"The Asian Champions League is an expensive exercise and this stab in the back from the FFA would be a financial blow to Adelaide United."
A FFA spokesman said the peak organisation sought a review of the decision to allow the logo "when it became clear not all the relevant information was fully considered".
"Once AFC was fully appraised of the situation, the approval was overturned," the spokesman said.
"As the governing body of football in Australia, FFA has a duty and responsibility to protect the image and reputation of the game.
"That is what we were doing in this case."