Contact the Owner
So how do you go about sending an email like this?
Well, first and foremost, it depends on who you are emailing. If you are emailing the domain registrar, then you will probably take a different attitude in your email than if you were emailing your competitor.
As with any sort of online communication, first and foremost you need to be polite and respectful, regardless of your feelings toward the person infringing your domain name.
You should also cite the UDRP (Uniform Domain-Name Dispute-Resolution Policy), a procedure established by ICANN (Internet Corporation for Assigned Names and Numbers) for dealing with these situations. Most notably, point out that the registrant has agreed when purchasing their domain name that they “will not infringe upon or otherwise violate the rights of any third party," – i.e., you.
Make it clear that all you want is for the third party to begin trading with a new name that doesn’t clash with your own, and if possible provide a list of suggestions that they might use. Additionally, point out that if their actions are damaging your business, the same is likely true in reverse; they might be better suited to finding a new domain name that they can succeed under, rather than one that leaves them constantly hanging on your coat tails.
If this isn’t possible, however, then you will need to escalate the issue to the UDRP. This process can take some time and a bit of money; your competitor might not be keen to take this step, so let them know early on that this is on the table if you cannot come to an agreement.