There are two types of competitor click fraud, fraud between advertisers and fraud between publishers. Fraud from an advertiser’s competitor is the most common.
Competitor click fraud between advertisers refers to the case where the head of a (small) company or employees click on PPC ads belonging to the competition. The aim is two-fold, consuming competition PPC budget and optimizing his own PPC budget. Indeed, the competitor fraud victim sees low performances on his campaign and makes adjustments by lowering his bids. Thus, the fraudster may take good ad positions for less.
Competitor click fraud is easier, more effective and more difficult to identify for high value keywords and for niche markets. It is therefore more often observed in BtoB context.
In addition to click fraud detection methods, competitor fraud may be partially prevented by using IP exclusion lists or geo exclusion.
The principle is different for fraud between publishers. The goal is to generate blatant click fraud "in favor" of a competitor publisher in the hope that he will be sanctioned by Google or other networks and that his publisher account will be closed. The practice is rare and is called AdSense click bombing.
For more details on click fraud methods, see click fraud.