Google contradicts itself on their guidelines. And if you read between the lines, then it seems that YES, a competitor can screw with you!.....
Can competitors harm ranking?
There's almost nothing a competitor can do to harm your ranking or have your site removed from our index. If you're concerned about another site linking to yours, we suggest contacting the webmaster of the site in question. Google aggregates and organizes information published on the web; we don't control the content of these pages.
Taken from:
http://support.google.com/webmasters/bin/answer.py?hl=en&answer=34449&topic=2365140&ctx=topic
