Ambushing Integrity?

We were recently asked by one of our clients to come up with a PR plan that would enable them to engage in ambush marketing around very large competitor-owned activities. Our view was that it could cause reputational harm for a listed company to do this. They told us that was nonsense and that both were possible. When taken to task on their ambush tactics publicly the entity denies engaging in it.

We, in the PR industry, are possibly naive - but is ambush marketing accepted business practice? Does it lower or increase staff morale within the client? I have found it very hard to get the two concepts to line up in my head and would like to hear some debate about it.