I am not sure where they are really breaking the rules, except for aesthetics, it looks nasty and probably they are reducing link juice by having so many links and such an incredibly spammy site all around.
The only thing I could see being bad is if they are selling those links, or possibly the other sites for their services just being doorway pages to get local listings. Possibly unethical, but not illegal.
On the flip side, you gave them a bunch of
PR (publicity) by promoting this.
If all you are doing is just setting up one link on a moderately well ranking site, with virtually no real organic value in traffic generation then you should feel threatened, but if you develop a network of on-topic links from a variety of sites that is designed to bring targeted traffic as well as "link juice" I think you'll be ok
Cheers,
James