Planet13 - 6:18 pm on Oct 29, 2010 (gmt 0)
My suggestion is to post it on the google webmaster tools forum with the response email that the company sent saying that it would cost $400 per month. Post a link to the page that has your competitors links on them. Then file a spam report with google and link to the post on the google webmaster tools forum 9and include the email that you got back saying that it would cost $400).
don't expect to hear anything back from google though.
Google has said that they don't try to take direct action on each individual report. What they try to do is analyze the info and incorporate it into their algo updates so it will be better at catching spam / paid for links. But if it is sever, they might penalize them manually. couldn't hurt to try.