If Jamie Oliver thought the American junk food industry was going sit back and twiddle its thumbs while he attempted to undermine its highly lucrative business model, he can think again.

The British chef and healthy eating campaigner is at the centre of a controversy involving a $1.2bn (£730m) lawsuit over efforts to draw public attention to a controversial form of mechanically separated meat popularly known as "pink slime". Beef Products Inc, a South Dakota processing firm, is suing the broadcaster ABC for allegedly spreading "false and defamatory" information about the now notorious product, which it describes as lean, finely textured beef. It says the offending slurs first hit the airwaves in May 2011, during an episode of Oliver's Food Revolution.

The British chef told viewers that "pink slime" is made by using a high-speed centrifuge to separate small amounts of beef from parts of a butchered carcass. The meat is then treated with ammonia to make it safe for human consumption, he alleged, then used to bulk out such products as mince, burgers and pies.

Oliver's report inspired a slew of hostile news stories, many of them on ABC, about the processed meat. Nationwide controversy ensued, followed by a consumer boycott. Earlier this year, many supermarket chains responded to the uproar by dropping goods containing the "slime" from their shelves.

There was but one problem. Beef Products Inc insists that Oliver and ABC deliberately misled viewers. It claims its product is both safe and healthy – because it carries less fat than normal beef. In a 257-page lawsuit, filed in Union County, South Dakota, the firm says that what it describes as unfair coverage caused its sales to drop by 80 per cent, forcing the closure of three of its four plants. Roughly 700 workers were laid off, and the company estimates that it is still losing $20m per month in revenue.

Dan Webb, Beef Products Inc's attorney in Chicago, said yesterday that Oliver had kicked off a campaign in which ABC "decided to destroy this business, and decimated its product in the marketplace". The broadcaster "did this with malice, and they knew what they were doing," he added.

Beef Products Inc, the world's biggest producer of such beef, wants $1.2bn for its pains. Some of that compensation represents lost earnings. The rest is punitive damages. A spokesman for Oliver declined to comment. But ABC issued a statement claiming: "The lawsuit is without merit. We will contest it vigorously."

Oliver's earthy language will form a central part of any legal proceedings. In its complaint, the company argues that the chef made "false statements" about the trimmings used to create its product.

"Oliver stated that, in the industry, the trimmings are referred to as 'shit'," reads the lawsuit. "Oliver continued his false statements about the beef trimmings by stating they are 'not fit for human consumption' ... are 'sold at the cheapest form for dogs' ... and are 'full of anything from salmonella [to] E coli'."

Beef Products Inc also criticises Oliver's portrait of its production process, saying he "depicted BPI's centrifuge system by placing the beef trimmings in a washing machine and setting the machine to spin".

The final part of the alleged hatchet job, they say, was that viewers were told that "slime" was then washed in ammonia to eliminate bacteria, even though "food-grade ammonium hydroxide ... is not similar to the household ammonia used in Oliver's depiction".

The very use of the term "pink slime" is unacceptably pejorative, the firm adds. Instead, it prefers it to be called "finely textured lean beef". It has the support of several, mostly Republican, politicians from cattle-rearing states, who have joined a campaign to convince the US public that the processed beef is safe.