Of course competitors can trash your organic rankings -- and it's a lot easier for them to trash you than it is to promote themselves.
I'm glad Google is slowly coming around to admitting that this house of mirrors has some flaws. The more information publishers get about this, the better choices we can make in content selection.
Edit: After reading the comments at the end of the story, magicalist is right. The story is wrong, Google made this change a lot longer than a week ago, it isn't actually news.
That's when their help page went from saying, "There's almost nothing a competitor can do to harm your ranking or have your site removed from our index." to "Google works hard to prevent other webmasters from being able to harm your ranking or have your site removed from our index."
In other words from saying, "Don't worry about it" to "We're on it".
Moreover, there's absolutely no information about how you could penalize someone's site. The article's speculation is exactly that.
Honestly, if it were as easy as buying a bunch of spam links to a site for $20 and get them penalized or delisted, there would have already been a host of exposés showing exactly that. There are a lot of motivated SEOs out there, chomping at the bit to show that their personal Google conspiracy theory is correct.
[1] http://www.seroundtable.com/google-can-competitors-harm-me-1...
That said, I have not experimented either way. But I've known enough people who accidentally hurt their own ratings that I don't see why it wouldn't be easy to hurt someone else's.
Here's the problem with that: the site they selected was spamming, and Google had already taken action on that site. The site had been spamming for years; see e.g. http://growabrain.typepad.com/growabrain/2007/10/fiat-126.ht... for a spam comment pointing to justgoodcars.com from January of 2008. Here's another spam link from April 2008: http://www.punny.org/money/ditch-your-ancient-car-and-get-30... . Or check out this low-quality directory link from years ago: http://www.easyweblistonline.com/News___Media/Automotive/ Or this low-quality directory: http://www.whatclicks.com/shopping/automotive.html
Google found a bunch of spammy links like this dating back years and years, and we took manual webspam action regarding this site before this so-called "detailed expose" of negative SEO ever came out.
Like many of the reports of "successful negative SEO" that we've investigated, the claims didn't hold up. In this case, we had already caught the site in question for spammy links going back years and years--long before the negative SEO campaign started.
What you seem to be suggesting is that information that people cannot be 100% sure of is perfectly valid, and reasonable to base decisions on. But, when that information is confirmed to be true, that has not enough value to report.
I simply do not understand or accept that way of thinking.