I spotted a new thread at Google Webmaster Help where Google is somewhat changing their tune to this claim.
JohnMu of Google said "theoretically, it's probably possible" that competitors can use links to hurt your rankings. Of course, John said it is extremely unlikely, adding:
But in practice, we have a lot of safeguards that help our algorithms to evaluate sites in useful ways. Our algorithms are pretty complex, it takes more than a handful of bad links to sway their opinion of a website. Even if Webmaster Tools shows a million links, then that's not going to change things if those links are all ignored for ranking purposes.
But this is one of the first times I have seen a Googler say, it is "probably possibile" for a competitor to use links to hurt a site. Of course, SEOs believe it was possible, right?
Take my poll, do you think a competitor can hurt your site in Google by using spam links?
This post is timely because someone tried this to my corporate site Sunday night. You can read that story at RustyBrick's blog. Personally, I am not worried about my site taking a dive in Google from this spam attack - but maybe I am naive.
Forum discussion at Google Webmaster Help.