The first thing that comes to mind, is how are you looking at the SERPS. You're not logged in are you? Clicking on a link while you're into your Google account will change the placing of it, as Google is always trying to recommend/localize your results. The best way to view the SERPs is in Incognito mode though that often doesn't always work.
If you are viewing the Competitor in Incognito and have seem him climb up, I would wonder if the links that he has passed have been affected by Panda or Penguin.
Yeah, I would also agree with AK, and take a look at the on-page optimization of the competitor. Has their on page optimization or content changed any?
