A WebmasterWorld thread discusses the topic of link buying versus link selling. One person made a bold claim that link buying will not hurt you, but link selling can hurt you. I don't think anyone would argue that Google proactively goes after link sellers. But do they proactively go after link buyers?
From what I see in the various forums, including the Google Webmaster Forums, Google does actively penalize sites for buying links. Time after time, I see a webmaster complain that his site does not rank well and a Googler coming in linking to the page about link schemes and/or paid links. On the paid links page, Google does not hide the fact that:
Buying or selling links that pass PageRank is in violation of Google's webmaster guidelines and can negatively impact a site's ranking in search results.
In fact, in 2007, Google added a report paid links form to encourage competitors to report paid links to them.
But what about competitors hurting your rankings? Google has a page about that as well. In the old days, Google said competitors can never really hurt your rankings, but now they said, "almost" never.
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.
In any event, there are many SEOs that successfully purchase links to gain rankings. They do it differently then normal link buying. So if you are going to purchase links, be smart about it and be creative. Otherwise, just write content that attracts normal links - it might just be safer and in the long run, easier.
Forum discussion at WebmasterWorld.