Google has never banned advertisers they compete with. You'll see ads for Bing, Yahoo etc. in Google Search all the time.
(Google is an affiliate: they do cost-per-action advertising on behalf of customers. Google is a search arbitrageur: they have a large source of searches which they can acquire cheaply, a large number of pages with content which is not quite responsive to user needs, and advertisers who are willing to pay for targeted traffic. The difference between Google and other search arbitrageurs is that typically the arbitrageur outsources the search engine and owns the content, where google owns the search engine and outsources the content to its AdSense partners.)