Share in Mondi (LSE: MNDI) fell sharply this morning after management responded to reports that Russia’s Federal Antimonopoly Service (FAS) has opened an investigation into some of its pricing practices which, investigators believe, violate federal competition laws.

The Russian authorities announced the investigation late last week via a press release, although, according to this morning’s response by Mondi, investigators are yet to provide formal notification to management. Investors will no doubt now be wondering whether this is a genuine and well-founded competition investigation or an act of political hostility.

Details & Implications for Mondi

The FAS alleges that Mondi has attempted to fix a “monopolistically high price” for  the offset printing paper it sells in Russia, after the London based business raised its selling prices by “roughly 50%” during the last year. According to the initial release there is a considerable discrepancy between price increases for the inputs required to make offset paper and the rate at which prices have been increased by Mondi.

Perhaps the fact that one individual company has enough of a grip on the paper market for it to be able to raise prices so sharply is suggestive of an undesirable situation from a competition standpoint. However, the prospect of Russian authorities involving themselves in the pricing of any private company’s products will do little to allay the concerns of western investors in Russia.

Regardless, it seems that for the time being the authorities have found their mark and are now busy lining up Mondi in their sights. The FAS has stated that it will consider all “case circumstances and arguments by the respondent” but exactly how the group gets out of this without it costing a small fortune, or worse, still remains to be seen.  

Imperial Tobacco & Polymetal

It isn’t unreasonable for nation states to act on concerns over competition and only time will tell whether this is a serious complaint or if it is just all politics being played out underneath the table.

However, Russian state authorities do not have a fantastic record when it comes to the fair treatment of foreign companies and, if Mondi is a sign of the times to come, investors would do well to consider the implications for their stakes in Imperial Tobacco/Brands (LSE:IMB) and Polymetal (LSE: POLY).  

Imperial’s largest market is Russia. It has a 9.2% market share and sells more cigarettes in this country than in any other, including China. Should concerns spread about the overreaching hand of the Russian authorities, then investors could soon start to discount the shares.

Equally, Polymetal is one of the region’s largest gold and silver miners, although it is listed in London. It holds the largest silver deposit in the world and has assets right the way across both Russia as well as Kazakhstan. Should the political winds cool even further shareholders may also need to consider the potential for the market to begin discounting these shares as well.

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James Skinner has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.