DEFRA took Asda to Portsmouth Magistrates Court last November, accusing it of breaking EU marketing rules by selling defective produce.
After the case was thrown out, DEFRA appealed to the High Court, which this week said the EU standards were "unknown to law" and could not be used to prosecute Asda.
However, DEFRA is now considering redrafting laws to ensure the EU regulations are upheld in British courts.
"It's clear we need to take action," said a spokesman.
Contrary to press reports, the case is not simply about EU quibbles about the correct curve of bananas and cucumbers, he stressed.
"This is a serious case about quality standards. Asda was selling seriously defective produce. Despite repeated warnings, they were selling rotten and mislabelled fruit and veg. They won on a narrow technical point of law."