We are heavily involved in the Automotive industry. I can speak from that vertical.
Very rarely (we have never) would you find same brand in same market but you will find competing brands. This is never an issue with us as we usually qualify search with product ("Toyota Camry service" vs "Honda Accord service) and geo.
In cases where the clients wants to focus on generic terms such as "new car" we would advise against that as its too broad a term - which helps us to avoid your valid concern. Our clients get much better results when they focus on their Primary Market Area
If I did run across your described scenario, ethically the only option is to only service the one client unless they were very specific in their focus areas (branding, non-local etc)