You expect your lawyer to represent you zealously, protect your confidentiality and loyally defend you. So what if your lawyer also represents a close competitor?
That's not necessarily a bad thing--unless you're suing that competitor, or vice versa. It's often a plus to hire a lawyer who specializes in an industry and understands its issues. But if you want your lawyer to double as a business advisor or serve on your board of directors, keep in mind you'll have to expose trade secrets--your business plans, strengths and weaknesses.
State bar associations require lawyers to abide by a code of conduct that addresses conflicts of interest and prohibits them from revealing confidential information to others. Ask yourself: Does my lawyer know things that I want to keep confidential, which the lawyer would otherwise disclose for the benefit of another client?
When do the drawbacks of having a lawyer who represents your competitor outweigh the benefits of having a lawyer who understands your industry? When both companies are bidding for the same contract, or when the rivalry lands in a courtroom. But the crux is this: The lawyer is required to review every client relationship and each business dealing regularly and tell you if there might be a conflict of interest, so you can judge for yourself whether to continue.