The consumer watchdog has rejected a proposed definition of free range eggs as being possibly misleading for customers about the conditions hens are raised in.
The Australian Egg Corporation wanted the definition to apply for up to 20,000 hens per hectare.
But Australian Competition and Consumer Commissioner Sarah Court said an initial assessment was the standard would not ensure hens spent enough time outdoors.
"If I'm a consumer in my supermarket and I look down at a box of eggs and there's a picture of a happy chicken outside with long grass and trees and lakes and that's called free range, that is my expectation of what a free range egg is," she said.
"It's really not that the hen is neither not outside at all or it is outside for very small periods." She said 1,600 submissions were received on the issue and only seven supported the proposed standard.
The current definition of free range allows for a maximum of 1,500 hens per hectare.
The Australian Egg Corporation says despite the ACCC's initial rejection it is confident of an eventual approval.
"We are confident that there is overwhelming evidence in favour of the new standards," the Corporation said in a statement.
"Of all the 171 audit points of the new quality assurance program, the ACCC has raised concerns relating to only a few and we are confident we can allay these concerns given the evidence in favour of those specific points.
"We recognise the importance of the need for reliable and consistent labelling to provide consumers with the information they need to make informed purchasing decisions."