Animal rights group SAFE says the egg industry's efforts to prevent producers misleading consumers over where eggs come from don't go far enough.
But the industry insists it's "very difficult" for dishonest operators to get away with fraudulent activity.
SAFE's comments come after an Auckland farmer was this week sentenced to 12 months' home detention after selling millions of eggs from caged hens as free-range.
Through his company Black Water Trading Limited, Xue (Frank) Chen bought more than 3 million caged eggs from other suppliers and packaged them into cartons labelled free-range, selling them at a higher price.
SAFE says the behaviour - which took place between September 2015 and October 2017 - shows the only effective way to stop further fraudulent activity is to ban cage eggs altogether.
The animal rights group said a programme by the Egg Producers Federation called "Trace My Egg" - which acts to reduce fraudulent labelling - doesn't go far enough as it is strictly voluntary. The group said the programme is "ripe for abuse".
"There's nothing stopping farms that participate in the Trace My Egg programme from stamping cage eggs as free-range, if that's what they're determined to do," said Jessica Chambers, SAFE corporate campaigns coordinator.
But the Egg Producers Federation, the body that represents the interests of all commercial egg farmers in the country, says Chen was a "rogue operator" and not the norm in the industry.
"The sentencing of Frank Chen signals the end of a frustrating period for New Zealand's egg producers whose reputations were unfairly tarnished by the selfish actions of a couple of rogue operators over a relatively short period," said Michael Brooks, executive director of the Egg Producers Federation.
Brooks said in recent years the industry has made "sweeping changes" to "make fraudulent activity easily detectable", with no new cases since reported.
He told Newshub he would like to see the egg tracing programme become mandatory, but such a move is only possible for food safety reasons.
"MPI looked at it, they looked at what's being done in Australia and at the time we agreed that there was no basis under food safety," he said.
He estimated around 70 percent of egg producers were either being stamped or were going to be stamped as part of the traceability programme.
Conventional battery cages will be phased out of New Zealand by the end of 2022 and replaced with colony cages, but SAFE says this is still a "highly confined system".
The group is calling for a ban on all cage eggs.
"Caged hen systems are being banned around the world on the grounds of animal cruelty. New Zealand needs to follow suit."
