HaRav Chaim Weg
Answer: Generally speaking, a local business is allowed to compete with a different local business, provided he isn't putting him out of business completely, whereas a non-local is not allowed to compete with local businesses if he is harming them in any way.
The teaching of Torah, however, is a clear exception to the rule. The Gemara clearly says that when it comes to teaching Torah, competition is always permitted due to the dictum of "kinas sofrim tarbeh chochmah", competition increases the quality of everyone's learning. Hence, anyone is allowed to offer a service related to teaching Torah, even if he lives outside the city and even if he will be putting existing Torah teachers in the city out of business.
In his Sefer Emunah U'Bitachon, the Chazon Ish speaks at length on this topic and stresses that one must know the halacha before taking action against a competing business one views as a threat. Taking action against a fellow Jew or his business is a very serious thing, and one cannot do so without knowing all the intricacies in halacha.
To illustrate this point, the Chazon Ish brings 2 contrasting scenarios. In case #1, an out-of-towner opens up a competing store and in the process harms the other local businesses; here it would be permitted to whatever possible to shut him down. In case #2, as in our case here, the out-of-towner opens up a new Talmud Torah and in the process the local schools lose out. This time he is 100% OK in doing so, and no-one has any right to try to shut him down.
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