Greenpeace will take a complaint to the Auditor General after discovering the company responsible for monitoring large chunks of the fishing industry is wholly owned by the industry's biggest lobby group.
The company, named FishServe, has been contracted by the Ministry for Primary Industries (MPI) for the past 20 years to monitor overfishing, take catch reports, manage quotas and decide on licences.
A Greenpeace investigation found the company is not only owned by the industry group Seafood New Zealand, but it operates from the same office and shares staff.
The revelations follow a series of controversies last year about fish dumping going unprosecuted, and a contract for camera-monitoring also being given to an industry-owned company.
Greenpeace New Zealand executive director Russel Norman said he believed the situation was an example of "regulatory capture", borne from a "web of complex relationships" between MPI and industry.
"What it means in practice is that, in order to prosecute fishing companies for legal breaches, the government regulator, MPI, has to rely on data collected and provided by a company owned by the fishing companies themselves, FishServe," he said.
"This is something that at the very least warrants further investigation and we'll be looking to refer this to the Auditor General for review."
FishServe is a wholly-owned subsidiary of Seafood New Zealand, with powers transferred to it by MPI in a series of legislative orders.
It operates from the same Wellington office as Seafood New Zealand - sharing a receptionist - as well as other industry groups including including Deepwater Group, Fisheries Inshore New Zealand and New Zealand Federation of Commercial Fishermen.
All of its four directors are involved in fishing. One, Tim Pankhurst, is also the chief executive of Seafood New Zealand.
Pankhurst did not respond to requests for comment. Seafood New Zealand's communications manager instead responded to Herald inquiries, saying there was "no conflict of interest".
She said while FishServe was a wholly-owned subsidiary of Seafood New Zealand, it was also an Approved Service Delivery Organisation in its own right, established under Government statute.
"This has been the case since 2001. It has its own dedicated chief executive and staff, who do not report directly to SNZ. It is funded through collection of fees from the industry."
A spokesperson for MPI said FishServe had been in place for almost 20 years without incident, and there were a number of checks and balances in place to ensure the data it provided was accurate.
FishServe underwent internal audit, and information from it was reconciled with data provided from Licensed Fish Receivers. Its function was administrative only, and it had no decision-making powers, it said.
However, Greenpeace pointed out that in the "transfer of powers" paper, FishServe not only appointed its own auditors, but was enabled to make decisions about licences for Fish Receivers. It was also entitled to monitor overfishing and determine when a prohibition would come into effect.
Norman said it was another case of the "fox guarding the hen house".
"We just don't understand how FishServe, working alongside lobby groups and fishing industry owned companies on a daily basis, owned and controlled by a powerful industry lobby group, can be allowed to act as proxy 'regulator'."
Scott McIndoe, from the recreational fishing group LegaSea, said it was not good enough to make the industry responsible for what he called a "broken and failing" inshore quota management system.
"We insist on ministerial discretion and responsibility being maintained," he said.
"Otherwise what will it look like in another 30 years time? Will [recreational fishers] be sitting on the beach watching those who 'value' fishing the most having all the fun?"
Primary Industries Minister Nathan Guy said there was no conflict of interest, because FishServe is "an administrative tool", and has no regulatory function.
"It is like a mailbox for collecting data," he said in a statement to the Herald.
"It has been publicly operating for over 20 years with no issue, and with a range of checks and balances on the data collected."
The FishServe revelations follow a rash of controversy in the fishing sector last year, including the ministry-commissioned Heron inquiry which found MPI had chosen not to prosecute local fishing captains who were caught on CCTV cameras dumping healthy-sized fish.
Heron looked at three separate investigations into dumping in 2003, 2012 and 2013, known as Operation Overdue, Operation Achilles and Operation Hippocamp.
Operation Achilles, in November 2012, discovered that five out of six vessels operating off the eastern coast of the South Island had discarded quota fish - mostly gurnard and elephant fish. Between 20 per cent and 100 per cent of quota fish were being thrown out with every haul.
However, despite a recommendation by the investigator, MPI did not proceed with a prosecution and instead issued a warning to the boats' skippers.
This decision, and the process leading up to it, was "flawed", Heron's report said.
At the same time, the Government committed to speeding up the rollout of onboard cameras on New Zealand's commercial fishing fleet, which are used to detect any illegal activity.
MPI appointed fishing industry-owned Trident Systems to install cameras on 15 vessels operating in Snapper 1, the country's most important fishery.