Why not? Isn't competition supposed to be a good thing? Also: if you're convinced an idea is going to be big, why not bet on a few companies at the same time? This is not a horse -race.
The most common problems happen when privileged information is exchanged between the competitors.
An example: Company A discovers a killer marketing technique that gives them a big advantage but they keep their success quiet. Then the shared VC tells Company B about it. Company A loses their competitive advantage (driving up their costs, etc).
That's one of a myriad of scenarios where information exchange can be unethical and highly damaging. The hard part is that even if your VC is 100% ethical they can easily make mistakes that cause problems.