Don't let any bully boys (AKA compete and utter low life cowards) discourage you.
Just focus on building your business by going about it in an ethical and professional way. By doing this you may well pick up some of the other guy's work. If his customers are happy with him, they will stick with him. If they are not, then you provide an instant alternative for them. That is his problem, not yours.
When this happens, just carry on doing the right thing. If bully boy tries it on with you again, contact the police, and if you find out his name etc., the DSS.
Best wishes,
John.