If your product isn't better than the free one why should anyone pay for it?

If it is better, why are you worrying about competition that offers an inferior product? If anything, that should drive more customers to your business.

That's not his problem.

Truth of the matter is, an awful lot of things that were previously commercially viable simply aren't any more because people are happy giving them away for free or releasing them with ad support. Few people will buy a web browser or CMS or programming language compiler/interpeter/envrionment, because free competition has made commercial ones obsolete.

Either way, it's just life. Things that were once expensive services only available to wealthy became commoditised and affordable for pennies, and new types of business became viable in their place.

So if you're running a company selling a form service and free competition is outcompeting you, then you'll have to adapt or die like anyone else. Or find some value proposition people are willing to pay for in that area (support, customisations, lots of new features, a glossy design, etc).