Thanks much for the insights - it's invaluable to hear and understand from your point of view.
In our specific case, the only thing our competitor has changed on the domains is the branding. All products are 100% the same, even the site navigation has an identical category structure, etc. You can sell they took the exact same "bones" of the website, and just slapped a different look/feel on it.
It's not like they developed a niche site with different pricing and/or only devoted to a subset of products. I suppose if someone did take the time to create such a thing, it's not quite as bad as the overt manipulation we're trying to fight.
Just to be a devil's advocate, some other things to consider are:
1. What are micro sites worth to your brand dilution and customer loyalty?
2. Do you want to be competing against yourself in PPC, or worse, opening this up for other competitors to abuse, starting off a bidding war?
3. Why not put the money and resources spent on those dup sites and PPC campaigns to better use?
I would argue that you can make MORE MONEY if you just strengthen your core brand and site user experience. Focus on converting your traffic; not just getting more.
Conversion Rate Optimization has a way better ROI than either PPC or SEO.
(see #7 - 2010 is the Year of Conversion Rate Optimization)
"The average business metrics improvement after a usability redesign is now 83%"