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Originally Posted by mrkris
Search engines do not drop your rankings because of sites linked to you. If this was so, it would be cheaper for someone to build a large network of crappy sites to link to competition to drop there rankings. You can't control who links to your site. If you are losing SE traffic, it is for a different reason, don't let anyone here tell you otherwise.
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That is not entirely true. If someone is linking to you that is 'unranked' or a PR0 it's not a great thing --- however, unless it's from a domain that's been seriously penalized it will not hurt you. Being linked to by someone from a 'bad neighborhood' can hurt, but from the sound of it this is not the case.
Do they have some PR? If they are a PR1 or up don't sweat it.
