I'm curious as to whether this was misused by malicious website owners buying links for competitors and then reporting the competitor to the Webmaster team to get them lose their top ranking?

What steps does Google take to ensure this does not happen? A poster below asked the same question and someone else responded saying there are no documented cases of this happening, but let's just assume it's a hypothetical situation for now. What will Google do when something like this happens? How will they verify who was wronged?