WDC's Venues and Events Manager John Lynch had emailed Ms Schlebach to say the council would monitor the market, and seek "remedies available to it under the licence agreement" if it failed to comply.
Mr Lynch said WDC did not want to evict the fair but had to address the issues raised by its tenants.
He would not carry out an inventory of market stock but admitted he didn't know what "remedies" were available, nor was he sure how to resolve the conflict should offending stallholders remain on the bridge.
"We have a responsibility to our tenants, who pay rent, rates and overheads.
"But we don't want to remove the market. This has been over-dramatised," he said.
Complaints were made to WDC by Town Basin tenants Nautical Trenz (greenstone) and the Kauri Shop. The Kauri Shop owners did not want to speak to the Advocate, but Rosemary Cox of Nautical Trenz said she was gutted people thought she wanted to close down the market.
She just wanted everyone to work from "an equal playing field".
"I just feel the rules are being flouted." Ms Schlebach said she signed the contract thinking the condition was "merely a formality".
"Does this mean we can't sell food, coffee, soft toys or jewellery? Where will this stop?
"We have had greenstone and kauri for years."
She was frustrated WDC was now trying to enact the condition, with the fair in its fourth season on the bridge.
The market, she said, was a vital tourism attraction and had become successful.
Grahame Roberts sells his handmade Kauri heirloom boxes on the bridge.
"I offered my products to the Kauri Shop and they didn't want them. So why can't I sell them on the bridge. This isn't a hobby, it's my livelihood."
Ms Schlebach has been offered a number of new locations for the fair, which she had not ruled out, since the row blew up and she wanted an apology from the WDC for the "impersonal email".
Mr Lynch said the issue had been "blown out of proportion".
He had not wanted to offend Ms Schlebach by emailing the cautionary note.
"I'm looking forward to sitting down with her and resolving the issue."