Matt Cutts in his recent podcast on bad links linking back your website proposed a pretty straight forward solution. Matt Cutts said that till the time you disavow all such kind of links i.e. bad links linking back to your website your website will be in a good condition, he further added that you can disavow a website that you don’t want to get associated with at domain level.
Practicing these recommendations will keep your website on safe side.
Recently I found two porn websites linking to my site. I disavow those links and wrote to admins asking them to remove those links but… what can I do if someone, (my competition), is trying to harm me with bad backlinks?