Game Freak/Nintendo get to destroy the competition, which is what this is really about.
Yes and no, you see Pocket Pair had partnered up with Sony, so because of that partnership Palworld is now the metaphorical equivalent of a mob family (Sony) encroaching on the territory of another mob family (Nintendo). Had Pocket Pair not partnered up with Sony, I'd bet you that Nintendo wouldn't have cared one bit.
Yes that's what the whole thing is about, it's about Nintendo protecting their territory from in their eyes a very blatant encroachment by Sony.
Counterpoint: Digimon, which is owned by another big company, Bamco. However Bamco and Nintendo are on good relationship terms as evidenced by Smash Bros. Sony and Nintendo however, have some history with each other, history that makes them not exactly see each other on friendly terms. Let's just say that if the original playstation plans had gone through, Sony would very likely have a major ownership stake in Nintendo today.
Again so much of the advertising, and marketing of Palworld was done by Sony, so this whole case is Nintendo trying to get Sony to back down, or at least make it very costly for Sony to take any territory from them.