Illegal? Probably, but I'm not a lawyer. I imagine the words "unfair competition" might be present somewhere on the legal paperwork. And if it's illegal but not

Illegal? Probably, but I'm not a lawyer. I imagine the words "unfair competition" might be present somewhere on the legal paperwork. And if it's illegal but not criminal, you have to sue the competitor yourself, which is expensive and time-consuming. PayPal probably should have some kind of hold on your account saying "don't shut off the account until we've investigated" but that might itself be abusable (see Facebook Xcheck). If this behavior is illegal they might also have standing to sue whoever is sending the reports. All of that requires you to have at least some amount of evidence tying the false reports to the competitor, too. Or at least enough evidence to survive a motion to dismiss so you can use discovery to get the rest of the story.