Do it anyway. 1) Creating the app is half the battle - executing on distribution is the main thing you'll have to fight. 2) You don't know what their end game

Do it anyway. 1) Creating the app is half the battle - executing on distribution is the main thing you'll have to fight. 2) You don't know what their end game for the app is - they might be creating it with a totally different function in mind. So even though up front you may think they've created something identical to what you are, that might not be true. 3) The fact that there's another app out there that does what you are planning on doing further validates that you have a great idea. 4) Don't be concerned with competitors. Phil Libin from Evernote said it best - on the list of top threats to your app's ability to succeed, a competitor's success doesn't even register.