Doing a little PR is a good idea as well. Sticking your head in the sand isn't going to make the situation go away, and can even lend credence to what is being said about you. Acknowledge the situation for what it is, but do it in a professional way. Take your time to think about how you want to bring this to the public. How far are you willing to go to defend your side of the issue? Plot a course of action for how you want to deal with the negative publicity.
When you finally do go public, stick to the facts and only the facts. Making sure that you have a truthful argument and a level head is your best chance to weather the drama. Trust me, people are likely to notice when others are acting irrationally, and you can use this to your advantage.
By using the facts to back up your side, you regain more control over what is going on, and force those lashing out against you to either dispute the facts or outright ignore them—not a great position for them. Don't sink to their level, no matter how badly you want to. This means that if you know who is attacking you, be it a competing business or an individual with a reputation at stake, don't go trying to smear them or call them out. After all, you're not in the fourth grade. You definitely want to take the high road here, and be remembered as the level-headed one in this situation.
You don't have to respond to every hurtful comment, either. Smear campaigns are well-known for being filled with ridiculous amounts of fluff and nonsense, and taking the time to debate each and every charge is simply a waste of time and energy. Answer the ones that relate directly to the issue, and don't feel like you have to keep responding to the same ones over and over.
Make public statements to your customers and colleagues, be it on your website, blog or social media venues. Explain to them that you know what is going on, and that you appreciate their support. Acknowledging the issue and explaining how you are working through it helps people to visualize what is going on more accurately. Remember, though—keep it classy. Like I've already mentioned, you're going to want to stick to the facts and be the bigger man here.
Has your business ever been targeted in a smear campaign? If so, what steps did you take to combat the situation? Leave a note in the comments—we'd love to hear your take on this increasingly common problem.