Why cheat?

'Can't quite figure the logic: we have a distributor who has started contracting with another manufacturer to make a rip-off version of a product that we already make - and he sells.

I say "logic" because I can't understand the business sense behind such an obviously unethical act. I'd use the word "dishonesty," but apparently it's not illegal - and fairly common. But what's the sense? An extra 2 cents profit margin? The chance to piss off us? Ill will & lost trust as the costs of doing business?