A competitor started bidding on our brand name. What are the actual options?

Your reading of the rules is correct. Bidding on the term is allowed, the trademark in the copy is not, and if their text is clean there is nothing to report. The options, in the order I would consider them: Defend properly first. On your own brand you should have a very high quality score, which means you can hold the top position at a fraction of their cost per click. If your brand CPC doubled, check the landing page and ad relevance on that campaign before spending anything - a weak brand campaign is what makes you cheap to attack. Do not retaliate on their brand unless you have a reason beyond symmetry. Competitor brand terms convert poorly for most businesses because the searcher has already chosen. It costs you money, it invites escalation, and the person you're punishing is not the one who made the decision. Do consider whether the traffic they are taking was ever yours. Some brand searches are research, not loyalty, and if a competitor can persuade someone who typed your name, that is a positioning problem rather than an auction problem. The unsatisfying truth is that this usually stops on its own within a quarter, because it is expensive for them and produces poor results. Holding position cheaply and waiting is generally the winning move, and it is a terrible answer to give a management team that wants blood.