Will Google crack down on paid links?

Bruce Clay has warned site owners this week to stop buying links, stating:

I want to be very clear that we think Google perceives deceptive linking methodologies and the ramifications of these actions as deceptive acts worthy of a penalty.

In the middle of 2010 Scott Willoughby from SEOmoz revealled that as an experiment, Rand Fishkin the SEOmoz CEO had bought a number of paid links to test their effectiveness.  The results can be seen in the Whiteboard Friday Post titled "We bought links and it worked!!" 

There still seems to be no answer as to what happens if you buy thousands of links and point them to a competitor's site.  One comment on the SEOmoz article suggests that 99% of paid link penalties are placed on the site selling links rather than those buying but there is plenty of anecdotal evidence to suggest that sites buying links have also been penalised.

If you would like to report a competitor for buying links, Matt Cutts has explained how to go about doing so here.