The scam, which may have lasted as long as five years and could have resulted in billions of mislabeled eggs being sold, demonstrates the need for processors to have their own tracking and tracing procedures in place, especially for ingredients sourced from abroad.
The fraud will have affected not only eggs sold as free range or organic, but also products that use premium ingredients.
During an operation that began in 2006, Department for Environment and Rural Affairs (Defra) investigated 12 million "suspect" eggs that were imported into the UK over a ten week period.
The inspectors used infra red light to examine the eggs, which had the tell-tail markings of those from caged birds.
This led to further investigations that resulted in the arrest of three people in the UK that are bailed to appear in court in April.
A further man, who is alleged to be the mastermind broker behind the scam, is being sought by Defra investigators and police.
Defra dismissed media speculation that the eggs in question were from Germany, but refused to divulge the true origin, which is known, because it is part of an on-going investigation.
Defra investigators are working with national counterparts from the country that the eggs are believed to have originated.
British inspectors have no remit to inspect premises and practices abroad and so must rely on foreign inspection authorities to ensure the true provenance of eggs the UK.
The Egg Marketing Inspectorate, a unit of Defra, is responsible for regulating the egg industry in the UK.
Defra said it was communicating with inspectors from the country in question, but refused to comment on whether foreign inspection services were at fault.
Defra have confirmed that food safety was not an issue during the investigation and only the labeling of eggs was under investigation and that the allegedly fraudulent activity had now ceased.
Of the 10 billion eggs consumed in the UK each year, around 15 per cent are imported, the Council said.
Retail accounts for half of the egg market worth £514m, while 28 per cent are used in egg products and 23 per cent are used for wholesale and catering, according to industry body statistics for 2005.
About a third of all eggs sold are free-range, of which three per cent are also organic.
The British Egg Industry Council said it fully supports Defra's investigations and they are co-operating with them.
"We wish to make it clear that both we and Defra are confident that no such fraud is continuing.
Consumers can have total confidence in British eggs," the industry organisation told FoodProductionDaily.com.