Yes, but like Larry said, that is not competition...that's people.
Actually, I do know of places/events where that has happened. It usually follows this format:
Nage tries to throw uke with kotegaishi nage and fails. Uke says "that won't work on me if you do it like that." Nage get's upset, tries again, but harder and still fails...and maybe tries to punch uke in the mouth. Uke prevents this, but both end up on the floor rolling around. Instructors come over and separate them.
This exact scenario HAS happened. There are people on this board who witnessed it. At an aikido seminar.
I believe you. However, it's a rare exception rather than common or even somewhat common. Out of all the dojos that are running (good ones, not McDojos), how often does that kind of incident happen? Yet, try googling either "sport riots" or "sport fights" and you'll find that it's somewhat common -- around the world. If a fight doesn't break out in a hockey game, it's not considered a good game. How many unsportsmanlike conduct flags in one football game? Fans rioting or throwing bottles onto the field. Etc, etc, etc.
The fact is that competition brings that out in people way, way more often than the martial arts do. That's the whole point. Sports are not even close to training the "spiritual" (I don't mean the new age kind of spiritual) component that a good martial art does. And the military has a structured training to it that rioting and fighting during games is rare.
And from what I can tell so far, I agree with Ueshiba.