Ethics companies = those companies whose stickers adorn many AV titles on the back of their covers. Two examples:
http://www.vsic.jp/ and
http://www.seihanrin.jp/
They are not owned by the gov't as far as I know, but many a retired police officer sits in top positions (amakudari) so don't expect mosaic to go anywhere soon.
Studios submit their movies there for 'approval'. These companies will look at the title and ensure that mosaic is properly applied and they don't violate other rules as well.
Submitting a movie isn't cheap though they have 'plans' for studios that submit a lot. Expect several hundred dollars per title (converted to USD).
The reason studios submit movies to these companies is because many big merchants like DMM, DUGA, and lots of physical disk shops (at least the big ones) won't sell titles if they don't have approval.
A studio doesn't need to get their titles approved. Milky-Cat for example pretty much sells independently so they don't bother getting Ethics approval.