Hi gibblet, I wanted to provide a response the other day.I understand the dilemma.The guy is fearful that you are going to take business away from him andyou will to some degree.These issues arise all the time and some people are so fearful or greedy that don't realize there is plenty of business for everyone.
With the guy bad mouthing your work that takes it to a whole different level.I wouldn't bad mouth him but I would more than likely go my own separate way.If you want to really saintly you can go have a conversation with him and tell him that you are not at his place to solicit business,if some of that happens naturally there is nothing you can do about it,but you can tell him that you will make an effort to steer people to him for repair work or new sales.
Given the kind of guy that he seems to be I would be headed in a different direction.Life is to short,there are plenty of really decent people out ther who you would be better off aligning with.