Yes competitors can harm your site.. and i tink is much more easily to harm competitor site like improve your own.. what is very sad but true..
Give me URL of your site and 20 USD as budget and i will show you how easy it is Some 1000s of indian links from fiver and your site is surely down in few months, or i will just use scrapebox for comment spamming, or spam on adults forums... there is many easy way how to harm competitors.. But it also depend how old is competitors site and what is current domain "prestige". Because google will surely ignore black SEO links if you focus on very strong and old domain. BTW I dont recommend use these procedures againts competitors!
You can pay for it yourself. My site is just a small one, not well known (https://www.gov.uk), so it should be easy for you. This isn't entirely true. WPMU had a link scheme and got slapped by a raging Penguin. SEOmoz invited negative SEO, got a notification, but not a penalty (the links were ignored). BBC got a link notification (but applied at a "granular level"). Why not if they supposedly work so well? According to you (so you must do it). So far the only proper study (objective and not the person claiming to have done the negative SEO) was Rand Fishkin which found the examples not to be credible. All this hype about negative SEO came up around Penguin and really seems to be people playing on site owners' fears and incorrect information in order to make a market. Well, more than one market. There are the link removal services, negative SEO, reputation management has been on the rise, too. Have a read of this guy's blog posts: http://www.nichepursuits.com/niche-site-project-1-overview/ Someone hit his site with negative links. It didn't work, i.e. they got ignored (which is most likely to happy). They copied his site and that worked. So, links were a fail, but content was another matter. He's dropped a few places recently, I guess the next blog update will explain that. (He has used some manipulative link practises, so that could well be the explanation. A better case study would have been to avoid that stuff and earn links instead.) Then there is also the fact it's a useful excuse. Penguin came along and was all about links. Lots of sites were hit that had been involved in manipulative practises. It brought up the question of negative SEO, which then became a very convenient excuse for site owners/SEOs. "It wasn't me, it was negative SEO!"
Disavow Tool of Google Webmaster Tools and making quality back links are solution of negative SEO. Check your back links regularly.