Here's a case study of a web site being prepared for launch and how a competitor managed to get it flagged as a scam site -- before it was even launched. It's shocking and it's a direct result of Google's algorithm changes.
From SEOBook: "A case study in being PRE negatively seo'ed."
Enter www.buymycar.com, an idea I had wanted to do for some time, where people list a car and it gets sent to a network of dealers who bid on it from a secure area. A simple idea but FAR from simple to implement.
Satisfied I had ticked all the boxes from hours of Matt Cutts video’s and Google guidelines documents, I went to work... I was enjoying building what I had hoped would be a useful site and kicked myself for not having done so sooner. I also thanked Google mentally for being smart enough now to reward better sites.
But after four months of work, testing, and signing up car dealers, and still before the full launch, the web site owner Robert Prime, checked to see what links there were to the site. To his horror he found 13,208 sites had used a link to his site using the anchor text "Buy My Car Scam."
...this was absolutely devastating to see.
A worried competitor had obviously decided I was a threat and to nip my site in the bud with Google and attack it before it had even fully started. The live launch date was scheduled for January 7th, 2013!
... I was faced with death by Google rankings ... before it had any rankings... my site being cited as a scam across the Internet before it launched!
Foremski's Take: Negative search engine optimization was rare until Google changed its algorithm over the past two years and started paying attention to the quality of the links to any web site.
It has led to a huge erasure of hyperlinks as web sites try to clean up large networks of their backlinks on sites that Google has ranked low.
But it has also added masses of new hyperlinks designed to tarnish the reputation of a competitor and to flag it within Google as a potential scam or spam site.
When competitors gain by using this tactic what is the response of an ethical business? Does it have to do the same because that's what the mechanics of Google's algorithm dictates? Ethics through algorithm or dictated by conscience?
How can businesses behave ethically if Google only responds to unethical behavior by others, such as labeling a competitor a scam?
The Google algorithm is more than a collection of numerical values -- it also ethical and moral values built in that can't be easily seen. The rise in negative SEO shows how the design of the algorithm encourages unethical business practices.
Can Google design an algorithm that rewards ethical businesses? Companies competing to be more ethical than each other would be a very good thing to see.
If Google can do one then it can do the other, imho.